The Soviet-style production quota for ethanol, pompously titled the Renewable Fuel Standard (RFS), is in trouble. The RFS requires more ethanol to be sold than can actually be blended into the nation’s motor fuel supply. This “blend wall” problem will get worse as RFS production quota and federal fuel economy standards ratchet up, forcing refiners to blend more and more ethanol into a shrinking motor fuel market.

Here’s the math. Total domestic U.S. motor fuel sales in 2011 stood at 134 billion gallons. Although the U.S. population is increasing, overall motor gasoline consumption is projected to decline by 14% as fuel economy standards tighten between now and 2025. Already, the 2013 blending target for “conventional” (corn-based) biofuel – 13.8 billion gallons — exceeds the 13.4 billion gallons that can be blended as E10 (a fuel mixture containing 10% ethanol).

By 2022, the RFS requires that 36 billion gallons of biofuel be sold in the domestic market, including 21 billion gallons of “advanced” (low-carbon) biofuel, of which 16 billion gallons are to be “cellulosic” (ethanol derived from non-edible plant material such as corn stover, wood chips, and prairie grasses). Because commercial-scale cellulosic plants still do not exist, the EPA repeatedly has had to dumb down the cellulosic blending targets.

Eventually, though, the EPA will have to mandate the sale of at least a few billion gallons of advanced biofuel, just to keep up the pretense that the RFS is something more than corporate welfare for corn farmers. In any event, by 2015, refiners will have to sell 15 billion gallons of corn-ethanol — roughly 1.6 billion gallons more than can be blended as E10.

A side effect of the blend wall is the recent “RINsanity” of skyrocketing biofuel credit prices. The EPA assigns a unique Renewable Identification Number (RIN) to every gallon of ethanol produced and a credit for each gallon sold as motor fuel. Refiners who cannot blend enough ethanol to meet their quota can use surplus credits accumulated during previous years or purchased from other refiners.

Because the blend wall makes the annually increasing quota more and more difficult to meet, RIN credits are suddenly in high demand. Credits that cost only 2-3 cents a gallon last year now sell for about 70 cents. Consumers ultimately pay the cost — an extra 7 cents for each gallon of E10 sold, or an additional $11.7 billion in motor fuel spending in 2013, according to commodity analysts Bill Lapp and Dave Juday. Ouch! Ethanol was supposed to reduce pain at the pump, not increase it.

The ethanol lobby offers two fixes for the blend wall. Neither is workable. The EPA thinks it has another card up its sleeve.

One option long advocated by the biofuel industry is for Congress to “incentivize” sales of E85 (motor fuel blended with up to 85% ethanol). Every gallon of ethanol sold as E85 represents up to 8.5 gallons of ethanol the refiner does not have to sell as E10. In theory, a robust market for E85 would enable refiners to meet the rest of their quota obligation within the E10 blend wall.

However, the chief obstacle to market penetration of E85 is not, as the ethanol lobby contends, the absence of political support such as flex-fuel vehicle mandates and tax breaks to install E85-capable storage tanks and blender pumps. The main barrier is simply that E85, due to its inferior energy density and poor fuel economy, is a money loser for consumers.

FuelEconomy.Gov, a Web site jointly administered by the EPA and the Department of Energy, makes this painfully clear. At today’s prices, the typical owner of a flex-fuel vehicle would spend up to $750 a year more to drive with E85 instead of regular gasoline.

The ethanol lobby’s other solution is for the EPA to approve the sale of E15 by conventional retail outlets. Approving E15 would allow refiners to increase by 50% the quantity of ethanol blended in each gallon of motor fuel sold. In October 2011, the EPA authorized the sale of E15 for newer automobiles (model years 2001 and later). But so far only a handful of retail outlets offer the fuel. As Platts explains, “Liability issues related to misfueling, the cost of outfitting a retail station to carry the fuel, and concerns raised by some auto manufacturers who won’t honor warranties if E15 is used, have dampened the market for the fuel.”

So what is the EPA’s clever new idea? Double down on E15 — literally. The EPA’s recently proposed Tier 3 Vehicle Emission and Fuel Standards Rule contains what New York Times reporter Matthew Wald calls an “audacious suggestion.” A major objective of the rule is to reduce the sulfur content of gasoline, and ethanol contains no sulfur. Under the proposed rule, automakers could “request” the EPA to certify vehicles “optimized” to run on high-octane fuels such as E30. The agency envisions a triple play, in which E30 lowers sulfur emissions, improves fuel economy, and pushes ethanol sales beyond the E10 blend wall (p. 28):

This could help manufacturers that wish to raise compression ratios to improve vehicle efficiency, as a step toward complying with the 2017 and later light-duty greenhouse gas and CAFE standards (2017 LD GHG). This in turn could help provide a market incentive to increase ethanol use beyond E10 by overcoming the disincentive of lower fuel economy associated with increasing ethanol concentrations in fuel, and enhance the environmental performance of ethanol as a transportation fuel by using it to enable more fuel efficient engines.

Ethanol contains less energy than gasoline by volume but, according to the EPA, a vehicle “optimized” to run on E30 could get better mileage than today’s vehicles. Wald explains:

Using high-octane premium-grade gas in an engine that does not require it offers no benefit. But in engines designed to squeeze the fuel-air mixture to very high pressures before igniting it with the spark plug, high-octane fuel burns predictably and can produce more horsepower. . . .Ethanol contains only about two-thirds as much energy as gasoline, gallon for gallon. But if it is burned in engines designed for high cylinder pressures, it will produce competitive horsepower.

Are E30-optimized vehicles commercially viable? The proposed Tier 3 rule provides no data on either the consumer cost of such vehicles or the fuel economy gains. Even if the lifetime fuel savings outweigh the increase in vehicle cost, that is not usually the decisive factor for most consumers, otherwise hybrid sales would be larger than 4% of the vehicle market.

One thing is clear. E30 would face an even bigger infrastructure challenge than E15 does. A March 2012 API study found that “very few” service stations would be able to sell E15 with existing equipment: “Equipment modifications could be as little as new hanging hardware (i.e., hose, nozzle, etc.) or as much as an entirely new fuel dispensing system.” More extensive modifications, such as new dispensers and a new storage tank, would likely be required to sell E30.

That’s a major expense for most service stations, which typically are small businesses with razor thin profit margins on the fuel they sell. According to the National Association of Convenience Stores (NACS):

The cost of a new fuel dispenser is approximately $20,000. An average store has four dispensers, so the cost could be as much as $80,000 to upgrade the dispensers alone. If underground equipment is also replaced, permitting and other related costs would increase expenses significantly.

In April 2012, NACS estimated that the nation’s 120,000 convenience stores would have to spend $22 billion on retrofits if they had to sell blends in the range of E30 and higher.

What would it take to mobilize that much capital? Consumer demand for E30-optimized vehicles is unlikely to surge to the point where the industry on its own would make the requisite investments. Given the debt crisis, Congress is unlikely to pony up billions in tax breaks to subsidize construction of a national E30 infrastructure.

Yet the EPA seems determined to shatter the E10 blend wall. The EPA’s “audacious suggestion” is thus most likely a beachhead for more aggressive moves down the line. Don’t be surprised if future Ethanol Protection Agency rules effectively mandate that new vehicles be designed to run on E30.

The International Monetary Fund (IMF) recently published a report urging the world’s governments to “reform” energy subsidies estimated at $1.9 trillion in 2011. Eliminating government policies designed to rig markets in favor of particular energy companies or industries is a worthy goal. Unfortunately, that’s not the agenda the IMF is pushing.

The IMF seeks to shame U.S. policymakers into enacting carbon and coal taxes by redefining the absence of such taxes as energy subsidies. The IMF’s rationale goes like this. Market prices do not reflect the harms (“negative externalities”) fossil fuels do to public health and the environment. Consequently, fossil fuels are under-priced and society consumes too much of them. Policymakers should enact corrective (“Pigou”) taxes to “internalize the externalities” (make polluters pay) and reduce consumption to “efficient” levels.

The IMF estimates that, by not imposing corrective taxes, the U.S. subsidizes fossil fuels to the tune of $502 billion annually, making America the world’s biggest energy subsdizer!

This is blackboard economics (the pretense of perfect information and flawless policy design and implementation) in the service of a partisan agenda.

Carbon taxers disclaim any intent to pick energy-market winners and losers, but that is in fact the core function of a carbon tax. As with cap-and-trade, the policy objective is to handicap fossil energy and, thereby, “finally make renewable energy the profitable kind of energy in America,” as President Obama put it.

Predictably, the IMF says not a word about the policy privileges widely bestowed on renewable energy (renewable electricity mandates, renewable fuel mandates, targeted tax breaks, feed-in tariffs, preferential loans, direct cash grants) or about the negative externalities associated with such subsidies (avian mortality, air and water pollution, food price inflation). 

This week at MasterResource.Org, I offer skeptical commentary on the “IMF’s Carbon Tax Shenanigans.” Here is a summary of key points (including two shrewd comments posted by Heritage Foundation economist David Kreutzer).

If “subsidy” is defined as a direct transfer of wealth from taxpayers or ratepayers to energy companies or industries, U.S. subsidies for renewables are much larger than those for fossil fuels, both in absolute terms and especially on a unit of production basis.

Even if we accept the IMF’s ”social cost of carbon” (SCC) estimate ($25 per ton of carbon dioxide emitted) and social cost of coal-related air pollution estimate ($62 billion in 2005), the IMF’s numbers don’t add up. U.S. CO2 emissions in 2011 were 5.5 billion tons. Multiply that by $25 per ton ($137.5 billion), add $62 billion, and we get $199.5 billion. That’s $302.5 billion or about 60% less than the IMF’s $502 billion estimate of total U.S. fossil-fuel subsidies.

The IMF advocates a $1.40/gal gasoline tax. This far exceeds the $0.22/gal tax implied by a $25 per ton SCC. American motorists on average already pay double the alleged SCC in combined federal and state gas taxes.

Gas prices have increased by more than $1.40/gal since the early 2000s, so the market has already granted the IMF’s wish to increase pain at the pump by the amount of the proposed corrective tax.

Traffic accidents and congestion account for 75% of the externalities the IMF proposes to correct via the $1.40/gal gas tax. Accidents and congestion are real costs but they have nothing to do with gasoline. If every car on the road were replaced with an electric vehicle, there would likely be the same number of accidents and levels of congestion.

A $1.40/gal gas tax would do little to curb accidents and congestion but would add about $740 to a low-income household’s annual motor fuel bill. Less affluent Americans would no doubt be grateful for such “efficiency.”

The social cost of carbon is an unknown quantity. Try, for example, to discern carbon’s social cost in the following information: There has been no trend in the strength or frequency of landfalling hurricanes in the world’s five main hurricane basins during the past 50-70 years; there has been no long-term trend in U.S. soil moisture since 1900 or in U.S. flood magnitudes for the past 85 years; global aggregate mortality and mortality rates related to extreme weather have declined by 93% and 98%, respectively, since the 1920s.

The IMF proposes a $65 per ton coal tax and claims to derive the price from a National Research Council (NRC) report, Hidden Costs of Energy, which estimates that coal power plant air pollution caused $62 billion in public health damage in 2005. The main pollutants of concern are sulfur dioxide (SO2), a precursor of fine particle (PM2.5) pollution, and direct PM2.5 emissions. The NRC relied chiefly on an American Cancer Society (ACS) study, Pope et al. (2002), to estimate the mortality effects of PM2.5. 

Even assuming the reliability of the ACS study, recent and forthcoming EPA regulations should virtually eliminate health risks related to coal power plants during the next decade. One EPA regulation alone, the Mercury and Air Toxics Standards (MATS) Rule, is projected to decrease power plant SO2 and PM2.5 emissions to 68% and 44% below 2005 levels, respectively, by 2017 (see Table 5A-6). 

Kreutzer, using Energy Information Administration (EIA) estimates of the U.S. average coal price ($41 per ton) and coal fuel-price elasticity of substitution (0.11), calculates that the IMF’s proposed $65 per ton coal tax would reduce power plant SO2 and PM2.5 emissions by 17.4% — much less than the MATS Rule’s reductions. Hence, Kreutzer concludes, if the IMF accurately estimates the externality to be corrected, “the EPA is already over controlling these emissions even without a tax on coal.”  

The social cost of coal, however, is as elusive as the social cost of carbon. Most PM2.5 pollution from power plants is in the form of ammonium sulfate and ammonium nitrate. As air quality analyst Joel Schwartz documents, clinical studies of volunteers, elderly asthmatics, and animals find that neither substance is harmful even at levels many times greater than are ever found in the air Americans breathe.

The ACS study underpinning the NRC’s $62 billion social cost of coal estimate attempts to find statistical associations between PM2.5 levels and mortality data in different U.S. cities. Toxicologist Julie Goodman cites six other epidemiological studies “that find no association between PM2.5 and mortality.” The NRC report does not consider any of those studies. The IMF probably does not even know what the NRC did not take into account.

Anne Smith of NERA Economic Consulting cautions that even if PM2.5 and mortality are associated, the uncertainties in epidemoliogical studies make quantifying the health benefits of PM2.5 reductions impossible. If so, determining an “efficient” corrective tax is also impossible.

Carbon taxes are very “efficient” at destroying jobs, wealth, and consumer welfare. Kreutzer and Heritage Foundation colleague Nicholas Loris compared two scenarios in the EIA’s Annual Energy Outlook 2012, one assuming a carbon tax that starts at $25 per ton and increases by 5% annually, the other assuming no tax or regulatory policies to curb CO2 emissions. Using the no-climate-policy scenario as a baseline, Kreutzer and Loris calculate that the aforesaid carbon tax reduces household income by $1,900 per year through 2016 and leads to aggregate job losses of more than 1 million jobs by 2016 alone.

Because people use a portion of their income to enhance their health and safety, taxes that reduce income and employment also have social costs. Numerous studies find that poverty and unemployment increase the risk of sickness and death.

Cato Institute scholar Indur Goklany documents how fossil fuels, by dramatically increasing the productivity of food production, distribution, and storage, ”saved humanity from nature and nature from humanity.” Fossil fuels have been and remain the chief energy source of a “cycle of progress” in which economic growth, technological change, human capital formation, and freer trade co-evolve and mutually reinforce each other.

Given the continuing importance of fossil fuels to human flourishing and the mortality risks of poverty and unemployment, the social cost of carbon taxes is potentially large. The IMF and other carbon tax advocates conveniently ignore this side of the policy ledger.

Carbon and coal taxes are regressive, placing a larger percentage burden on poor households, which spend a larger share of their income on energy and other necessities. The IMF recommends that governments use “targeted social programs,” i.e. welfare, to offset the effects of higher energy prices. Those who view global warming alarm as a pretext for redistributing wealth and transforming America into a European-style welfare state may be on to something.

Last week on this blog, I explained how Dow Chemical’s chief rationale for restricting exports of liquefied natural gas (LNG) — the claim that gas used as a feed stock in domestic manufacturing adds more value to the economy than gas exported overseas – would also justify:

• Curbing Dow’s exports of chemicals, plastics, and electronic components to help domestic manufacturers of paints, cosmetics, pharmaceuticals, cell phones, laptops, and other finished goods become more competitive in the global marketplace.
• Empowering bureaucratic agencies to commandeer private property whenever they think the resource would add more value in the hands of some other firm or industry.

Dow CEO Andrew Liveris would no doubt cry bloody murder if Congress proposed to give Dow a dose of its own medicine and restrict the company’s exports in the “public interest.” Presumably, Mr. Liveris would also disavow any sympathy for confiscatory centralized economic planning, although that is in effect what he is advocating.

Other rationales Dow and its allies invoke to oppose “unfettered” gas exports include:

1. “Unlimited” gas exports could dramatically reduce the domestic supply of the natural gas liquids (NGLs) on which manufacturers depend as key feed stocks.
2. Long-term contracts to export liquefied natural gas (LNG) will “lock in” deliveries to foreign buyers, subjecting U.S. manufacturers to high risks of price shocks and supply disruptions.
3. Approving all LNG export applications that have been submitted to the Department of Energy (DOE) could result in ”half” of all U.S. gas produced being burned for the Btus in overseas power plants, pushing U.S. gas prices to Asian levels.

These are all false alarms. Let’s take them one at a time.

The angst that ”unchecked” exports of natgas to feed Japanese power plants will have dramatic impacts on the domestic supply of NGLs such as ethane, propane, and butane is baseless. Dry gas is what’s used for electricity. When natgas is produced, it often contains liquids, which are separated out in various steps along the path from the ground through the pipes and on to consumers. Those NGLs are then sold as their own unique product, and they typically fetch premium prices. This is why many producers are moving out of dry gas places like the Haynesville in Louisiana and Barnett in north Texas, as those formations are essentially just dry gas. They’ve moved on to Eagle Ford, Bakken, and parts of the Utica and Marcellus (among others) where there’s not just oil but also relatively high concentrations of NGLs. Key point: The NGLs are separated out before the dry gas is burned as electricity fuel, whether in domestic or foreign power plants.

One thing an increase in gas exports will indisputably do is increase investment in domestic gas production. That is good for consumers of NGLs. A report for the American Chemistry Council found that increasing shale development will benefit chemical manufacturers who use NGLs as feed stock, because increasing production means increasing supplies of NGLs. From the report:

America’s chemical companies use ethane, a natural gas liquid derived from shale gas, as a feedstock in numerous applications. Its relatively low price gives U.S. manufacturers an advantage over many competitors around the world that rely on naphtha, a more expensive, oil-based feedstock. Growth in domestic shale gas production is helping to reduce U.S. natural gas prices and create a more stable supply of natural gas and ethane.

Further development of the nation’s shale gas and ethane can drive an even greater expansion in domestic petrochemical capacity, provided that policymakers avoid unreasonable restrictions on supply.

As you’d expect from a market allowed to work, increased natgas production increases the supply of NGLs, which in turn puts downward pressure on NGL prices. Since gas converted to LNG would come mostly from new producing wells (that’s according to the Energy Information Administration), LNG exports would likely increase the available supply of NGLs.

As for long-term contracts, chemical companies can use them too to reduce exposure to price spikes in the spot market, and some already do. A recent example is Methanex, which decided to relocate a plant from Chile to Louisiana. Commenting on the potential price impact from exports, the CEO basically said he didn’t care because Methanex locked in a long term supply contract with Chesapeake. As reported in the Globe and Mail:

Debate is raging in the United States about whether the government should put limits on plans to build liquified natural gas facilities that would transform that country into a gas exporter from being a significant importer just a few years ago. An industry coalition of energy-consuming companies, such as Dow Chemical Co. and Hoechst Celanese Corp., argues that “unfettered” exports would drive up natural gas prices and rob U.S. manufacturers of a key advantage they enjoy against global competitors.

Mr. Floren said Methanex has no intention of getting involved in a political debate in the United States, adding that the company expects to pay off the capital cost of moving its Chile plants in less than four years, and that exports of LNG will not ramp up before then. But he said the 10-year supply deal with Chesapeake is critical insurance against an unexpected spike in gas prices down the road.

In his oral testimony, Dow CEO Andrew Liveris fretted that if DOE approves all the LNG export applications it is considering, producers could ship “half” of America’s natgas “bounty” overseas, driving prices to Asian levels. This alarming scenario has no basis in reality. Several factors will constrain natgas exports — the cost of constructing export facilities, the moderating effect of exports on Asian gas prices, and competition from foreign suppliers. In addition, increased demand due to exports will boost domestic production, which will limit increases in domestic prices. Here’s what experts are saying:

Daniel Yergin, President IHS CERA –

Many LNG projects for the United States have been announced. These would be expensive facilities to build — $10 billion or more. Only a handful, in our view, are likely to end up being financed and built. The reason is both cost and the scale of global competition. Currently, 95 million tons of new annual capacity around the world are either under construction or have been committed, which is equivalent to fully a third of existing capacity. Capacity in the U.S. that might be coming into a market late in this decade or early in the next will have to compete with new supply from existing exporters, such as Australia, and the new sources, such as off-shore East Africa and the Eastern Mediterranean. Moreover, western Canada is likely to become a major exporter of LNG to the main markets in Asia. This competition will create a global market offset on how many projects are actually built.

Thomas Choi, Natural Gas Practice Leader, Deloitte LLP –

US LNG exports are unlikely to cause US prices to rise to levels of importing regions. Just because US markets are connected to import markets does not mean that US prices will rise to the level of import countries. The cost of LNG liquefaction, shipping, and regasification provides a large price wedge between prices in the US and import markets. . . . Given how dynamic the North American gas market is and the abundance of US gas supplies available at similar cost levels, our model projects modest price impacts at our assumed export volumes.

Dr. Charles Ebinger, Brookings Institution –

Under the most reasonable assumptions (in this case assuming 6 bcf/day of exports), most reports forecast that natural gas prices will be between 2 and 11 percent higher in 2035 than if the U.S. did not export LNG. There are a number of factors that insulate domestic prices from dramatic increases in price as a result of exports. First . . . there is a market-determined limit on how much the United States can economically export, depending on domestic prices, the international gas market, and the global market for competing fuels. Second, the size of the resource base is substantial, an important factor because the EIA estimates that roughly 63% of the gas required to meet demand for LNG export will come from increased domestic production. Finally, the domestic natural gas sector is very efficient and producers are able to respond rapidly to marginal increases in the domestic price.

David Montgomery, NERA Economic Consulting –

As DOE officials themselves explain, it is easy to apply to DOE for a license and necessary to have one in order to start the approval process at the FERC. But only three projects have officially begun the FERC process, and no expert familiar with the industry expects even a small fraction of the total capacity that has made application to DOE will be built in the next decade. . . . First, there will always be a difference of $6 to $8 between Asian prices and U.S. prices, since that represents the cost of inland transportation, liquefying, shipping, and regasifying natural gas to get it from the U.S. to Japan or Korea. Asian buyers have no incentive to buy gas in the U.S. if it is not cheaper than their prevailing domestic price by that amount. Assuming that current, larger LNG pricing differentials will persist in a world in which LNG exports increase at a rapid rate ignores everything we know about supply and demand, and is the fallacy that has led to the demise of many bubbles of energy investment.

Kenneth Medlock, James A. Baker Institute, Rice University –

According to a recent Baker Institute study, commercially viable shale gas resources have rendered the domestic supply curve to be very elastic. This means that even modest changes in price will result in significant changes in production. So, the capacity for the US market to absorb large increases in demand without significant upward pressure on price is large. In fact, the central tendency of prices is now projected to be between $4.50/mcf and $5.50/mcf over the next few decades. . . .The paper goes on to argue that (a) the impact on US domestic prices will not be large if exports are allowed, and (b) the long term volume of exports from the US will not likely be very large given expected market developments abroad.

A final thought. What would Mr. Liveris say if Congress were actually to consider restricting Dow’s exports on the theory that it is in the “public interest” to lower “feed stock” prices for final goods manufacturers so they can export more of their high “value-added” products?

He’d probably argue — correctly — that the proposal is short-sighted and self-defeating. Restricting U.S. chemical industry exports might create a temporary glut and lower prices, but the policy would quickly boomerang. As Dow, Celanease, Eastman, and Huntsman lost sales, profits, and market share, they would also lose investment and asset value, and production would decline. U.S. paint, cosmetic, pharmaceutical, and fertilizer companies would find themselves more dependent on imported chemicals. The imports would be pricier not only because of transport costs but also because the foreign suppliers would face less competition from Dow and other U.S. chemical manufacturers.

The same logic, of course, applies to coercive restraints on exports of U.S. natural gas. If increased gas production benefits chemical companies, then they should be the first to oppose any policy that reduces gas companies’ incentive to produce. Limiting the oil and gas industry’s ability to compete in the global marketplace would do exactly that.

Earth Hour wastes energy and harms the planet.  Bjørn Lomborg, a Danish academic and environmental writer, recently lambasted Earth Hour, the annual tradition of turning off the lights, which falls on March 23:

In fact, Earth Hour will cause emissions to increase. As the United Kingdom’s National Grid operators have found, a small decline in electricity consumption does not translate into less energy being pumped into the grid, and therefore will not reduce emissions. Moreover, during Earth Hour, any significant drop in electricity demand will entail a reduction in CO2 emissions during the hour, but it will be offset by the surge from firing up coal or gas stations to restore electricity supplies afterwards.

And the cozy candles that many participants will light, which seem so natural and environmentally friendly, are still fossil fuels – and almost 100 times less efficient than incandescent light bulbs. Using one candle for each switched-off bulb cancels out even the theoretical CO2 reduction; using two candles means that you emit more CO2.

To some self-styled environmentalists and bureaucrats, symbolism is more important than reality.  The Environmental Protection Agency clings to ethanol mandates, imposing them despite growing evidence that they increase world hunger and mortality, and harm the environment.  As the Wall Street Journal noted, in October 2011,

the Competitive Enterprise Institute and Action Aid petitioned the EPA to review the so-called renewable fuel standard that mandates that 13.8 billion gallons of corn ethanol be blended into the gasoline supply next year. The free-market think tank and global hunger charity argued that the EPA’s technical regulations implementing the mandate did not meet “basic standards of quality” [since] EPA failed to consider multiple peer-reviewed studies documenting the link between ethanol and world hunger in its public health literature review, as required by law. That includes one paper that concludes that biofuel mandates are responsible for at least 192,000 premature deaths every year. Overall more people die from chronic hunger world-wide than malaria, tuberculosis and AIDS combined.

EPA disregarded this evidence, and denied the petition after a fourteenth-month delay.  (A request for reconsideration has been filed).

In 2008, a Washington Post editorial by two prominent environmentalists described how ethanol mandates have harmed the environment and spawned hunger across the world.   In “Ethanol’s Failed Promise,” Lester Pearson and Jonathan Lewis observed that “Turning one-fourth of our corn into fuel is affecting global food prices. U.S. food prices are rising at twice the rate of inflation, hitting the pocketbooks of lower-income Americans and people living on fixed incomes.  .  .Deadly food riots have broken out in dozens of nations in the past few months, most recently in Haiti and Egypt. World Bank President Robert Zoellick warns of a global food emergency.”

Moreover, they noted,

food-to-fuel mandates are leading to increased environmental damage. First, producing ethanol requires huge amounts of energy — most of which comes from coal. Second, the production process creates a number of hazardous byproducts. . .Third, food-to-fuel mandates are helping drive up the price of agricultural staples, leading to significant changes in land use with major environmental harm. Here in the United States, farmers are pulling land out of the federal conservation program, threatening fragile habitats. . .Most troubling, though, is that the higher food prices caused in large part by food-to-fuel mandates create incentives for global deforestation, including in the Amazon basin. As Time Magazine reported this month, huge swaths of forest are being cleared for agricultural development. The result is devastating: We lose an ecological treasure and critical habitat for endangered species, as well as the world’s largest ‘carbon sink.’ And when the forests are cleared and the land plowed for farming, the carbon that had been sequestered in the plants and soil is released. Princeton scholar Tim Searchinger has modeled this impact and reports in Science magazine that the net impact of the food-to-fuel push will be an increase in global carbon emissions — and thus a catalyst for climate change.

In Human Events, Deroy Murdock chronicled how rising food prices resulting from ethanol forced starving Haitians to literally eat dirt (dirt cookies made of vegetable oil, salt, and dirt), and fueled violent protests in unstable “powder kegs” like Pakistan and Egypt.  More recently, biofuel mandates have fueled hunger and malnutrition in Guatemala.

The Obama Administration has forced up the ethanol content of gasoline, heedless of the fact that ethanol makes gas costlier and dirtier, increases ozone pollution, and increases the death toll from smog and air pollution. Ethanol mandates also result in deforestation, soil erosion, and water pollution.  By driving up food prices, they have fueled Islamic extremism in Afghanistan, Egypt, Yemen and other poor countries in the Middle East. The Obama Administration persists in supporting ethanol mandates despite widespread criticism from experts across the political spectrum.

Dow Chemical CEO Andrew Liveris has been making waves of late with congressional testimony and a Wall Street Journal oped advocating restrictions on U.S. exports of liquefied natural gas (LNG).

To oppose “unfettered,” ”unlimited,” or “unchecked” LNG exports — in other words, to fetter, limit, and check the freedom of gas producers to sell their own products — Dow formed a business group called America’s Energy Advantage (AEA). Other members include Alcoa, Eastman, Huntsman, and Nucor.

AEA’s rationale for restricting gas exports (to quote Liveris’s oral testimony) is that when gas is not exported but instead is used to manufacture products, it creates “eight times the value” across the entire economy. That claim derives from a Charles River Associates (CRA) study sponsored by – drum roll, please – Dow. According to CRA, using gas as a manufacturing input trounces gas exports in terms of job creation, GDP growth, and trade-deficit reduction. Therefore, AEA argues, Congress and/or the Department of Energy (DOE) should constrain LNG exports in the “public interest.” AEA also warns that higher gas prices from increased overseas demand could destroy tens of thousands of manufacturing jobs and kill the U.S. manufacturing renaissance. AEA claims it is not opposed to all LNG exports, it just wants a “balanced” approach.

Economist Craig Pirrong (a.k.a. the “Streetwise Professor“) deftly pops this rhetorical balloon:

I am adding a new entry to my list of phrases that put me on guard that someone is trying to con me: “balanced approach.”. . . . In Obamaland, “balanced approaches” mean large tax increases now, and hazy promises of spending cuts in some distant future. In Liveris’s oped, “balanced” means imposing restrictions on exports of natural gas to lower the cost of his most important input. Funny, ain’t it, that things seem to tip the way of those advocating “balanced approaches”? In other words, if it helps me, it’s fair and balanced!

The whole thing is galling. Even if Liveris were correct and gas turned into chemicals generates “eight times” the economic value of gas sold abroad, such third-party assessments should have no bearing on how companies dispose of their own property. As American Enterprise Institute scholar Mark Perry points out, AEA companies did not invest a dime to develop fracking and horizontal drilling technology, construct the wells, or hire the rig workers, yet they presume to decide what happens to the gas after it’s extracted from miles under the Earth. Not unlike the Supreme Court’s Kelo decision, AEA’s implicit premise is that central planners have the right, nay the duty, to commandeer private property whenever the resource would add more value in someone else’s hands.

But do Liveris and AEA really believe the rationale they’re pushing, or only when it cuts in their favor? Here’s an easy way to tell. Dow, Alcoa, Eastman, Huntsman, and Nucor primarily manufacture intermediate goods, not final goods. As natural gas is an input to them, so their products are inputs to still other companies. AEA-produced chemicals, plastics, electronic components, aluminum, and steel reach the consumer only after other manufacturers “add value” by turning those “feed stocks” into paints, cosmetics, fertilizers, pharmaceuticals, computers, cell phones, automobiles, and so on.

So by AEA’s logic, the government should restrict exports of chemicals, aluminum, and steel to hold down domestic prices and make U.S. manufacturers of final goods more competitive. The “public interest” demands it! I’ll bet my salary against Liveris’s that he will never, ever agree that sauce for the goose should also be sauce for the gander.

It apparently has not occurred to anyone at AEA that their agenda could backfire. AEA and CRA are preaching free-lunch economics, which never works as intended. They assume Congress or DOE can curb shale gas exports and nothing else about the natural gas industry will change. There will be no decline in investment and production. Supply will remain high and prices low. Ridiculous!

It’s bad enough groups like the Sierra Club seek to shut down fracking and, therefore, block LNG exports. But at least their agenda is internally consistent. Gas companies won’t frack what they can’t sell, so greens oppose LNG exports to restrict U.S. gas company sales and global market share. Dow, on the other hand, wants both more fracking and constrained exports. That does not compute. The AEA campaign adds to the gas industry’s already serious political risks. Actually empowering bureaucrats to make “value added” determinations of which U.S. firms get to compete in the global LNG market would likely reduce oil and gas industry investment in the production of Dow’s beloved “feed stocks.”

AEA also fails to consider the risks its agenda poses to the broader global trading system. The AEA proposal conflicts with Article XI:1 of the General Agreement on Tariffs and Trade (GATT), which prohibits adoption of quantitative restrictions on natural resource exports to promote or protect domestic processing industries.

In September 2010, the U.S. steel workers and other manufacturing unions petitioned the U.S. Trade Representative (USTR) to investigate China’s restrictions on exports of rare earth elements (among other trade-distorting policies). In June 2012, the USTR requested the World Trade Organization (WTO) to set up a dispute resolution panel to examine China’s export restraints. Earlier this week, the U.S., EU, and Japan filed a complaint with the WTO challenging China’s rare-earth export restrictions. Reuters notes that, “The EU, the United States and Mexico won a similar case against China in January concerning other raw materials.”  Chemical, steel, and aluminum workers take note: The U.S. cannot flout the same treaty obligations and trade principles we invoke without looking ridiculous and undermining the “rules-based free trade” in which Mr. Liveris professes to believe.

Ed Pirrong’s comment on this point is suitable for framing:

Here’s a balanced rule for you, Mr. Liveris: Producers can sell to whomever offers them the highest price.  Short. Simple. Easy to understand.  No bureaucrats required.  And to show what a broad minded guy I am, I propose that the rule be applied to Dow.

The CRA study commissioned by Dow is partly a critique of a NERA Economic Consulting study, prepared for DOE to help the agency review a host of LNG export license applications. NERA estimated the economic impacts of different levels of LNG exports for a range of scenarios assuming different levels of demand, supply, and price. NERA concluded:

Across all these scenarios, the U.S. was projected to gain net economic benefits from allowing LNG exports. Moreover, for every one of the market scenarios examined, net economic benefits increased as the level of LNG exports increased. In particular, scenarios with unlimited exports always had higher net economic benefits than corresponding cases with limited exports.

NERA economist David Montgomery offers a concise rebuttal to the CRA study in this Q&A document. Here I’ll excerpt two paragraphs that seem to me most relevant to the issues discussed above.

Is there any possibility of a contraction of manufacturing because of higher energy costs?
No, as prior NERA studies have shown, the real threat for manufacturing is growing government regulation, of which export restrictions would be another part. The one thing about LNG exports that is certain is that they will grow slowly, and that any difference they make will be a small change in the rate at which manufacturing expands. With the possible exception of a very small slice of the chemical industry [the nitrogen fertilizer industry which employed approximately 3,920 works in 2007], there is no chance that LNG exports could turn robust growth into decline.

Don’t the data show that 1 BCF [billion cubic feet] of gas in manufacturing generates more value than 1 BCF of exports?
Absolutely not, that is an error that any first year economics student would recognize. Value added in manufacturing is created by the labor and capital at work in the industry, not by physical inputs like natural gas. The value of natural gas is fully captured by the willingness of customers to purchase the natural gas – and if overseas purchasers are willing to pay more for natural gas than domestic producers from whom some gas might be bid away, then clearly natural gas generates more value as an export than when used domestically. That is the basis for NERA’s conclusions, not some revolutionary change in the structure of industry over the past few years.

“U.S. EPA has altered its cellulosic biofuel requirements for 2012 — from 8.65 million gallons to zero,” today’s Climatewire reports. In January, the D.C. Circuit Court of Appeals vacated EPA’s 2012 cellulosic biofuels standard. “As a result,” Climatewire explains, ”obligated parties — oil companies required to show EPA that they blend biofuels in their fuel supply — won’t need to provide information on their compliance. The agency will submit refunds to companies that have submitted payments for 2012 cellulosic waiver credits.”

Who says there’s no justice in this world! For several years the EPA has fined refiners for not purchasing and blending ethanol made from switchgrass, wood chips, and other fibrous, non-edible plants. Refiners protested that there was no commercial cellulosic fuel to buy. The EPA argued that didn’t matter because the Renewable Fuel Standard (RFS) is meant to be “technology forcing.” The agency thus based each year’s cellulosic target on aspirational (rather than realistic) projections of how much cellulosic fuel would be produced. It then cheerfully collected fines for all the gallons of phantom fuel refiners did not blend.

The Court held that punishing refiners for what the ethanol industry failed to do is not “technology forcing”:

EPA applies the pressure to one industry (the refiners) [citation omitted], yet it is another (the producers of cellulosic biofuel) that enjoys the requisite expertise, plant, capital and ultimate opportunity for profit. Apart from their role as captive consumers, the refiners are in no position to ensure, or even contribute to, growth in the cellulosic biofuel industry. “Do a good job, cellulosic fuel producers. If you fail, we’ll fine your customers.” Given this asymmetry in incentives, EPA’s projection is not “technology-forcing” in the same sense as other innovation-minded regulations that we have upheld.

Zeroing out the RFS cellulosic blending targets established by the Energy Independence and Security Act (EISA) is long overdue. EISA (p. 32) required refiners to sell 100 million gallons of cellulosic ethanol in 2010, 250 million gallons in 2011, and 500 million gallons in 2012. Because hoped-for breakthroughs did not occur, the EPA dumbed down the mandated quantities to 6.5 million gallons in 2010, 6.0 million in 2011, and 8.65 million in 2012. However, even those symbolic targets were unattainable. In 2012, the U.S. biofuel industry produced only 20,069 gallons of cellulosic ethanol, according to Climatewire. As of early 2013, no commercial-scale cellulosic ethanol plants exist.

How come? The ethanol industry is quick to blame others. Supposedly, the E10 blend wall — the EPA policy that, until June 2012, limited to 10% the amount of ethanol permitted in a gallon of gasoline – allowed corn ethanol to saturate the market and crowd out demand for cellulosic fuel. Supposedly also, political attacks on the RFS have created uncertainty about the future of government policy, scaring away investors. Whether or not these factors play some role, the chief barrier to commercialization is cost.

In an article about BP’s recent cancelation of a $350 million cellulosic plant in Highlands County, Florida, MIT Technology Review editor Kevin Bullis observes:

Economists have recently done field studies to determine just how much the feedstocks—the grasses, wood chips, straw, or corn stover—actually cost to grow, harvest, and get to a biofuels plant. Whereas early estimates—the ones that helped spur the cellulosic ethanol mandates—put the cost at $30 a ton, the actual costs are more like $80 to $130 a ton. That means the grass and wood chips required to make a gallon of ethanol will cost $1.30 to $1.48—even before anything is done to process them. (For context, the price of a gallon of processed ethanol made from corn is now $2.40 a gallon.)

Based on the cost for plants like the one BP proposed in Florida, the cost could be 10 times higher for a cellulosic plant than a corn ethanol one, at least for the first plants, says Wallace Tyner, a professor of agricultural economics at Purdue University.

This morning I attended a briefing on “The Renewable Fuel Standard: Pitfalls, Challenges, and the Need for Congressional Action in 2013.” Steve Ellis of Taxpayers for Common Sense moderated a panel of six experts. Although each expert spotlighted a different set of harms arising from the RFS, reflecting the core concern of his or her organization, this was a team effort, with panelists frequently affirming each other’s key points. Collectively, they made a strong case that the RFS is a “costly failure.” The briefing’s purpose was to demonstrate the need for reform rather than outline a specific reform agenda. Panelists nonetheless agreed that, at a minimum, Congress should scale back the RFS blending targets for corn ethanol.

Kristin Sundell of ActionAid explained how the RFS exacerbates world hunger, undermining U.S. foreign aid and international security objectives. The RFS diverts 15% of the world corn supply from food to fuel, putting upward pressure on food prices. A recent Tufts University study estimates that U.S. ethanol expansion during the past 6 years cost developing countries more than $5.5 billion in higher prices for corn imports. In Guatemala, the additional expense ($28 million) in 2011 effectively cancelled out all U.S. food aid and agricultural assistance for that year. Food price spikes, partly due to the RFS, were a factor in the recent turmoil in the Middle East. ”Congress can’t control the weather, but they can control misguided energy policies that could cause a global food crisis,” Sundell said.

Kristin Wilcox of the American Frozen Food Institute discussed the RFS’s impact on food consumers. Corn is both the chief animal feed and an ingredient in about 75% of all frozen foods. Consequently, RFS-induced increases in corn prices drive up “the cost of producing a wide range of foods and leads to higher food bills for consumers.” In addition, when corn prices go up, so do the prices of other commodities that compete with corn such as wheat and soybeans. ”Our position is very simple,” Wilcox said: “food should be used to fuel bodies, not vehicle engines.” She concluded: “Trying to change the price at the pump should not burden consumers with increased prices in the grocery check out aisle.”

Actually, as Geoff Moody of the American Fuel & Petrochemical Manufacturers pointed out, the RFS aggravates rather than alleviates pain at the pump. Graphs from the Energy Information Administration show that biofuels are more expensive than gasoline on an energy-content (per-mile) basis. The higher the ethanol blend, the more expensive it is to drive, which is why fewer than 4% of flex-fuel vehicle owners fill up with E85 (motor fuel blended with 85% ethanol).

Moody’s major point was that the RFS is becoming increasingly unworkable. Already the 135 billion gallon U.S. motor fuel market is nearly saturated with E10. By 2022, U.S. motor fuel consumption is projected to be about 25% lower than Congress assumed when it expanded the RFS in 2007. If Congress does not revise the RFS, refiners will have to sell E20 or higher, but the existing retail infrastructure is not equipped to handle blends higher than E10. A typical service station may clear a profit of only $45,000 on motor fuel sales, but replacing pumps and storage tanks to handle higher blends can cost $50,000 to $200,000.

Scott Faber of the Environmental Working Group discussed the RFS program’s environmental impacts, especially changes in land use. From 2008 to 2011, high crop prices and crop subsidies contributed to the conversion of 23 million acres of wetlands and grasslands, an area the size of Indiana. About 8.4 million acres were converted to corn production. “We have lost more wetlands and grasslands in the last four years than we have in the last 40 years,” Faber said. If lawmakers knew in 2007 what we now know about the RFS’s many serious unintended consequences, they would not have enacted the program, Faber opined.

Tom Elam of Farm Econ LLC discussed the RFS program’s impacts on livestock producers and meat and poultry consumers. Since Congress created the RFS in 2005, annual feed costs have increased by $8.8 billion for chicken producers and $1.9 billion for turkey producers. Consequences of those higher costs include an 8 billion pound decline in poultry production, eight major bankruptcies, a half billion dollar loss in farm income, and higher prices for consumers.

Retail broiler prices, for example, increased from $1.74/lb in 2005 to $1.97/lb in December 2012. Turkey prices similarly rose from $1.07/lb in 2005 to $1.80/lb in early 2012. Beef and pork prices too rose along with feed costs, with the result that U.S. per capita meat and poultry consumption declined by about 10% since 2008.

The RFS may be good for corn farmers, but it fosters economic inefficiency. For every $1 of added ethanol production, food production costs increased $2.89. In other words, food producers bear a cost “more than twice the value of the ethanol created.”

Jim Currie of the National Marine Manufacturers Association explained the perils of E15 to the $72 billion per year U.S. recreational boating industry. Boats and other small gasoline-powered engines are designed to run on motor fuels blended with 10% ethanol or less. Consequently, “anything above E10 poses serious problems, including performance issues like stalling, corrosion leading to oil or fuel leaks, increased emissions and damaged valves, rubber fuel lines and gaskets.”

Higher blends are trouble for two reasons. First, ethanol is a solvent and at increased concentrations eats away at engine components. Second, ethanol is an oxygenate, and the higher the oxygen content of a fuel, the hotter the burn. Tests supervised by the Department of Energy’s National Renewable Energy Lab prove “time and time again that marine engines and, by extrapolation, other types of engines, simply cannot tolerate the high levels of additional oxygen that this fuel blend forces into the engine.” Currie presented lab test photos of such engine damage (pp. 3-7 of this Power Point).

Valve rupture from E15

Touching on the potential risks E15 poses to automobiles, he quoted the AAA’s statement of last December: “Only about 12 million out of the more than 240 million light-duty vehicles on the roads today are approved by manufacturers to use E15 gasoline.”

Currie’s conclusion drew applause from the Hill crowd:

As I am the last presenter today, let me offer a hypothetical scenario, based on what you have heard. Suppose an organization approached the Hill today and said, “We have a great idea for a new policy. It will largely benefit a small number of people in one part of the country, and members of Congress from there will support it wholeheartedly. The downside is that it will hurt the environment; and conservation practices; and will drive up food costs; and hurt people in developing countries; and will potentially damage every small engine in the country, including those in motorcycles and snowmobiles and ATVs and lawnmowers and generators; and it will damage boat engines; and it will potentially damage most automobile engines and will void your engine warranty if you use it. But we want you to enact a law requiring the American consumer to use it anyway.” That’s where we are today, and we think this law needs to be changed.

The UK-based Global Warming Policy Foundation (GWPF) has published prize-winning author Matt Ridley’s A Lukewarmer’s Ten Tests: What It Would Take to Persuade Me that Current Climate Policy Makes Sense. 

For coercive decarbonization to make sense, Ridley argues, climate alarmists would have persuade us of ten things, none of which is plausible in light of either recent science, economic data, or moral common sense.

Such articles of alarmist faith include the propositions that the urban heat island effect has been fully purged from the surface temperature record, water vapor and cloud feedbacks will eventually amplify the modest observed warming trend since 1979, mankind will fail to adapt to climate change even though there has already been a 98% reduction in the probability of death from extreme weather since the 1920s, and today’s relatively poor generation should bear the cost of damages that may not materialize until a far wealthier future generation.

Ridley concludes that the UK’s “current energy and climate policy is probably more dangerous, both economically and ecologically, than climate change itself.”

Ridley is well aware of the argument that “even a very small probability of a very large and dangerous change in the climate justifies drastic action.” But he notes that ”Pascal’s wager cuts both ways.” 

To climate alarmists, Ridley would reply that “a very small probability of a very large and dangerous effect from the adoption of large-scale renewable energy, reduced economic growth through carbon taxes or geo-engineering also justifies extreme caution.” Big picture: “At the moment, it seems highly likely that the cure is worse than the disease. We are taking chemotherapy for a cold.”

President Obama’s second inaugural speech featured climate change more prominently than did his first inaugural address. As Greenwire (subscription required) observed:

Gone was Obama’s roundabout reference to climate change through “the specter of a warming planet” from four years ago. This time, the president put the issue front and center.

Will that make any difference legislatively? Probably not. In the House, Republicans opposed to cap-and-trade, EPA regulation of greenhouse gases (GHGs), and carbon taxes are still in charge.

Is the President’s renewed emphasis on climate change just a sop to his environmentalist base? Doubtful. As a second termer, Obama has less reason politically to restrain his ‘progressive’ impulses. Several regulatory options are now in play:

• The Department of Interior could list more species as threatened or endangered based on climate change concerns.
• The President could finally veto the Keystone XL pipeline — a key objective of the climate alarm movement.
• The EPA could issue GHG performance standards for existing (as distinct from new or modified) coal power plants, as well as GHG performance standards for other industrial categories (refineries, cement production facilities, steel mills, paper mills, etc.).
• The EPA could finally act on petitions pending from the Bush administration to set GHG emission standards for marine vessels, aircraft, and non-road vehicles.
• The EPA could finally act on a December 2009 petition by the Center for Biological Diversity and 350.Org to establish national ambient air quality standards (NAAQS) for carbon dioxide (CO2) and other GHGs.

I’ll make one prediction: If Obama does not veto the Keystone XL Pipeline after talking the talk on climate change, green groups will go ballistic (even though, Cato Institute scholar Chip Knappenberger calculates, full-throttle operation of the Keystone XL Pipeline would add an inconsequential 0.0001°C/yr to global temperatures). My colleague Myron Ebell reasonably speculates that Obama’s tough talk on climate was a signal to green groups to organize the biggest anti-Keystone protest ever.

Now let’s examine the climate change segment of Obama’s inaugural speech:

We, the people, still believe that our obligations as Americans are not just to ourselves, but to all posterity.  We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations.  Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires, and crippling drought, and more powerful storms.  The path towards sustainable energy sources will be long and sometimes difficult.  But America cannot resist this transition; we must lead it.  We cannot cede to other nations the technology that will power new jobs and new industries – we must claim its promise.  That is how we will maintain our economic vitality and our national treasure – our forests and waterways; our croplands and snowcapped peaks.  That is how we will preserve our planet, commanded to our care by God.  That’s what will lend meaning to the creed our fathers once declared.

Taking these statements one at a time, yes, of course, “We, the people” acknowledge obligations to posterity. Among those obligations is to secure the blessings of liberty. Liberty is endangered when non-elected officials like those at the EPA enact climate policy and erode the separation of powers.

Another obligation to posterity is not to kill the goose that lays the golden eggs. Federal monetary and housing policies destabilized financial markets in 2008, entitlement spending imperils America’s very solvency, carbon taxes or their regulatory equivalent could inflict huge job and GDP losses by making affordable energy costly and scarce, and the green crusade against coal mining, hydraulic fracturing, unconventional oil, and energy exports threatens one of the few bright spots in the economy today. Posterity will not thank us if policymakers foolishly try to tax, spend, and regulate America back to prosperity.

The U.S. contribution to global warming over the 21st century is projected to be small – about 0.2°C, according to the UN IPCC. Even an aggressive de-carbonization program costing hundreds of billions would theoretically avert only about 0.1°C by 2100. Posterity will not thank us for consuming vast resources with so little benefit to public health and welfare.

“Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires, and crippling drought, and more powerful storms,” the President says. But even assuming the President is right about the science, since even aggressive emission controls would at best avert only a tiny amount of warming, such policies would afford no protection from fires, drought, or storms.

And what does the President mean by the “overwhelming judgment of science” anyway? Mr. Obama implies that recent fires, drought, and storms would not have occurred but for anthropogenic climate change. That is ideology talking, not science.

That a warmer, drier climate will spawn more frequent forest fires and fires of longer duration is almost a tautology. Nonetheless, some studies find no change in global fire activity over the past century and more. Ocean cycles and forestry practices also influence the frequency and extent of wildfires. Whether recent U.S. wildfires are primarily due to global climate change or other factors is neither obvious nor easily determined.

As for drought, there is no long-term trend in U.S. soil moisture such as might be correlated with the increase in atmospheric GHG concentrations.

Regarding storms, studies find no long-term increase in the strength and frequency of land-falling hurricanes globally over the past 50-70 years and no trend in Atlantic tropical cyclone behavior over the past 370 years.

Hurricane Sandy was a ’super storm’ not because it was an intense hurricane (Sandy was a category 1 before making landfall), but because it was massive in area and merged with a winter frontal storm. The combined storm system contained more integrated kinetic energy (IKE) than Hurricane Katrina. Scientists simply do not know how global climate change affects the formation of such “hybrid” storms.

Inconvenient fact: The USA is currently enjoying the “longest streak ever recorded without an intense [category 3-5] hurricane landfall.”

Explains University of Colorado Prof. Roger Pielke, Jr.: ”When the Atlantic hurricane season starts next June 1, it will have been 2,777 days since the last time an intense (that is a Category 3, 4 or 5) hurricane made landfall along the US coast (Wilma in 2005). Such a prolonged period without an intense hurricane landfall has not been observed since 1900.”

If, as the President seems to assume, all weather anomalies are due to global climate change, then how would he explain the extraordinary 7-year “drought” of intense landfalling U.S. hurricanes?

Mr. Obama says that, “The path towards sustainable energy sources will be long and sometimes difficult.” Indeed. In the famous “Crisis of Confidence“ speech of July 15, 1979, President Jimmy Carter proposed a plan to obtain 20% of America’s energy from solar power by the year 2000. More than three decades later, solar provides 0.25% of U.S. energy (solar contributes 2.5% of all forms of renewable energy combined, which in turn provide 10% of total U.S. energy). Moreover, the piddling contributions of wind, solar power, and biofuels depend on a panoply of government favors: mandates, direct subsidies, and special tax breaks.

The allegedly “sustainable” energy sources championed by the President are not self-sustaining. The main reason is that they are inferior to fossil fuels in terms of energy density (bang for buck) and — in the case of wind and solar power – reliability and dispatchability.

Solyndra, the Obama administration’s mascot solar company that burned through $535 million of the taxpayers’ money before going broke, is not the only failure in the President’s green investment portfolio. The Institute for Energy Research provides information on eight other “stimulosers“ that also “failed, laid off workers, or have a bleak financial outlook.”

Because politicians get to play with other people’s money, hope continually triumphs over experience, and they never learn what three MIT scholars learned from the Carter administration’s energy programs:

If an energy technology is commercially viable, no government support is needed; if it is not commercially viable, no amount of government support can make it so.

The President says that, “America cannot resist this transition; we must lead it. We cannot cede to other nations the technology that will power new jobs and new industries – we must claim its promise.” But that’s just it — how does he know, despite the Solyndra and other failures, the tiny market shares of politically-correct renewables, and the intractable dependence of renewables on policy privileges – that wind and solar power are the future? What information does he have that tens of thousands of savvy investors don’t?

The President alludes to the great clean energy ‘race’ that America supposedly cannot afford to lose. But as my colleague William Yeatman points out, the race is itself a creature of mandate and subsidy. China subsidizes its solar panel manufacturers, for example, because U.S. states establish Soviet-style production quota for renewable energy and EU countries subsidize renewable electricity via feed-in tariffs (FITs). China’s subsidies, in turn, are the official justification for the Stimulus loans to companies like Solyndra. But Beijing is flush with cash; Washington, deep in debt. We cannot outspend China in a subsidy war.

Throwing good money after bad makes even less sense given the global financial crisis and the cutbacks Spain, Germany, France, Greece, Italy, and Ontario (Canada) have been forced to make in their FITs. The renewable market increasingly resembles a bubble (over-investment relative to actual market demand). Yeatman cautions:

When the renewable energy bubble bursts, the global industry leader will be the biggest loser. With that in mind, the supposed race with China for green technological supremacy is one the U.S. would be wise to forfeit.

The climate segment of Mr. Obama’s speech concludes with a theological flourish:

That [investing in clean tech] is how we will preserve our planet, commanded to our care by God.  That’s what will lend meaning to the creed our fathers once declared.

A lot may be implied in those words. Obama refers to the creed — the philosophy of rights and government — articulated in the Declaration of Independence. He seems to suggest that its meaning for our times lies in the doctrine of ‘creation care,’ a green variant of progressive theology. But whereas the Declaration articulated a philosophy of limited government, green theology aims to expand the reach and scope of government. Al Gore gave voice to similar views in his 1992 book on “ecology and the human spirit,” Earth in the Balance. He famously  declared that the time had come to “make rescue of the environment the central organizing principle of civilization.”

Where does Mr. Obama stand on creation care theology and Gore’s central organizing principle? I don’t know but will loudly applaud any journalist who, interviewing the President, has the curiosity and moxie to pursue this line of inquiry.

Cato Institute scholars Patrick Michaels and Chip Knappenberger have produced a layman-friendly yet thoroughly referenced draft report summarizing “the important science that is missing from Global Climate Change Impacts in the United States,” a U.S. Government document underpinning the EPA’s December 2009 endangerment rule, the foundation of all of the agency’s greenhouse gas (GHG) regulations.

Pat and Chip’s draft report, titled Addendum: Climate Change Impacts in the United States, is a sober antidote to the climate fear-mongering patronized by the Obama administration, mainstream media, the U.N., corporate rent seekers, and the green movement. Among the best features are the numerous graphics, some of which I will post here.

Taking these in no particular order, let’s begin with the scariest part of Al Gore’s “planetary emergency”: sea-level rise. Is the rate of sea-level rise dangerously accelerating? No. Over the 20th century, there was considerable decadal variation in the rate of sea-level rise but no long-term trend.

Decadal rate of sea level rise from satellites (red curve) appended to the decadal rate of global sea level rise as determined from a nine-station tide gauge network for the period 1904–2003 (blue curve) and from a 177-station tide gauge network for the period 1948–2002 (magenta). Adapted from Holgate, S.J., 2007: On the decadal rate of sea level change during the 20th century. Geophysical Research Letters, 34, doi:10.1029/2006 GL028492

The UN IPCC Fouth Assessment Report (2007) famously concluded that “most of the observed increase in global average temperature since the mid-20th century is very likely due to the observed increase in anthropogenic greenhouse gas concentrations.” However, recent studies attribute components of the observed warming to other factors. Adding up those contributions, Pat and Chip calculate that greenhouse gas concentrations account for less than half of the observed warming since 1950.

“Observed” global average temperature anomalies from 1950–2010 (red) and “adjusted” global temperature anomalies after accounting for non-greenhouse gas influences from a cold bias in sea surface temperatures, a warm bias in land temperatures, increases in stratospheric water vapor, and revised estimates of the warming effect from black carbon aerosols (blue). The trend through the adjusted temperature anomalies is less than half the trend in the original “observed” data series. [Sources provided in footnotes 67-73 on p. 34.] 

Climate models typically overestimate actual warming, indicating that they overestimate climate sensitivity (the amount of warming resulting from a given increase in GHG concentrations).

During the 15 year period from 1997-2011, the observed rate of global warming as derived from the five major compilations of global average surface temperatures (GISS (red), NOAA (green), Hadley Center (dark blue), MSU satellite—University of Alabama version (yellow) and MSU satellite (Remote Sensing Systems version (light blue) falls out in the left-hand tail of the distribution of model projected trends of the same length (grey bars).

Is the recent Midwest drought evidence that our fuelish ways are destabilizing the climate system? No. There is no long-term trend in U.S. soil moisture such as might be correlated with the increase in atmospheric GHG concentrations.

The Palmer Drought Severity Index (PDSI) shows no trend in the area of the nation experiencing drought or excessive wetness over the period of record that begins in 1895.

In fact, throughout the U.S., soil moisture in the 20th century increased in more areas than it declined.

Source: Andreadis, K.M., and D.P. Lettenmaier, 2006: Trends in 20th century drought over the continental United States. Geophysical Research Letters, 33, L10403, doi:10.1029/2006GL025711

Okay, but as the world warms (and as urban heat islands expand), there are going to be more heat waves, and more people will die, right? Yes and no. “Mortality from heat waves declines as heat wave frequency increases, and deaths from extreme cold decline dramatically as cold air preferentially warms.” Cities with the most frequent hot weather, such as Phoenix, AZ and Tampa, FL, have virtually no heat-related mortality.

 Average heat-related mortality in U.S. urban areas has declined nationwide; subsequent research shows this trend continues into the 21st century. [Sources: Davis RE, et al., 2003. Changing Heat-Related Mortality in the United States. Environmental Health Perspectives 111, 1712–18. Kalkstein, L.S., et al., 2011. An evaluation of the progress in reducing heat-related human mortality in major U.S. cities. Natural Hazards 56, 113-129.]

Is global warming spinning up ever more powerful tropical cyclones? In the Atlantic Basin, there has been no long-term trend in the accumulated cyclone energy (ACE) index (which combines the duration and intensity of each storm into a seasonal total).

Accumulated Cyclone Energy (ACE) index for the Atlantic Basin from 1851 through 2010. There is obviously no relationship to long-term temperature rise or GHG concentrations. Data available at http://www.aoml.noaa.gov/hrd/tcfaq/E11.html.

Nor has there been a long-term increase in ACE globally since 1970.

Global hurricane activity as measured by the ACE index has been in general decline since the early 1990s and as of 2011 was near its 40-year low. Source: Maue, R.N., 2011: Recent historically low global tropical cyclone activity. Geophysical Research Letters, 38, L14803, doi:10.1029/2011GL047711

Is global warming altering wind patterns such that more hurricanes are striking the U.S.? There has been no long-term trend in the number of hurricanes and major (category 3-5) hurricanes making landfall in the U.S.

U.S. landfalling decadal hurricane counts reached their maximum in the 1940s. Source: Blake, E.S., C.W. Landsea, and E.J. Gibney, 2011: The deadliest, costliest, and most intense United States tropical cyclones from 1851 to 2010 (and other frequently requested hurricane facts). NOAA Technical Memorandum NWS NHC-6, National Weather Service, National Hurricane Center, Miami, FL, http://www.nhc.noaa.gov/pdf/nws-nhc-6.pdf

Okay, but apart from hurricanes, has the area of the U.S. experiencing extreme weather expanded as GHG concentrations have increased? The National Climate Data Center’s Climate Extremes Index (CEI) plots the ”fraction of the area of the United States experiencing extremes in monthly mean surface temperature, daily precipitation, and drought.” The CEI has increased since 1970 but the current weather regime “clearly resembles that of the early 20th century, long before major greenhouse gas emissions.”

Climate extreme index, not counting tropical storms and hurricanes, 1920-2010. Source: Gleason, K.L., et al., 2008: A revised U.S. Climate Extremes Index. Journal of Climate, 21, 2124-2137.

But surely, tornadoes are more frequent now than ever, and what else can explain this except the increase in GHG concentrations? Actually, it’s the ability to detect small tornadoes that has increased. If we consider just the large tornadoes (F3-F5) that have been detectable for decades, there is no trend.

Number of strong U.S. tornadoes, 1950–2011. Source: NCDC, U.S. Tornado Climatology, 7 March 2012, at http://www.ncdc.noaa.gov/oa/climate/severeweather/tornadoes.html, visited 11 May 2012.

But tornadoes are killing more people, right? Nope.

U.S. tornado death rate, 1900–2011. Sources: Updated from Goklany (2009a), using USBC (2011); NWS, Hazard Statistics at http://www.weather.gov/os/hazstats.shtml, accessed May 11, 2012; NWS, Storm Prediction Center, Annual U.S. Killer Tornado Statistics, at http://www.spc.noaa.gov/climo/torn/fataltorn.html, accessed May 11, 2012.

The same holds for mortality rates and extreme weather generally:

For the U.S., the cumulative average annual deaths from extreme weather events declined by 6% from 1979–1992 to 1993–2006 (despite a 17% increase in population), while all-cause deaths increased by 14%. [Source: Goklany, I.M. 2009. Deaths and Death Rates from Extreme Weather Events: 1900-2008. Journal of American Physicians and Surgeons 14, 102-09]

Hurricane damages keep going up and up, but that’s due to the ongoing rise in population and development in coastal areas. When hurricane damage is adjusted for changes in population, wealth, and inflation, there is no long-term trend.

U.S. tropical cyclone damage adjusted for inflation, population growth and wealth, 1900-2012 [Note - I am using a more updated graph than the one appearing in Addendum. Source: Pielke et al. 2008. Normalized Hurricane Damage in the United States: 1900-2005, Natural Hazards Review, DOI: 10.1061/1527-6988, 9:1(29), updated 12/31/2012].

Okay, but warmer temperatures mean more photo-chemical smog and worse air pollution, right? Only if air pollutant emissions stay the same, but emissions have declined on average by 67% since 1980. Further declines are projected as auto fleets and capital stock are replaced by newer, cleaner models.

Despite an increasing population, energy consumption, and economic productivity, U.S. pollution emissions declined by 67% since 1980. [Source: U.S. Environmental Protection Agency, Air Trends, http://epa.gov/airtrends/index.html]

Whatever risks climate change may pose to U.S. agriculture in the future, warming historically has not been associated with reductions in crop yield.

U.S. Cotton, corn and wheat yields, 1866–2010 [Source: National Agricultural Statistics Service, QuickStats 1.0 (2010), available at http://www.nass.usda.gov/Statistics by_Subject/index.php?sector=CROPS, downloaded December 26, 2010]

Remember the U.N. Environment Program’s (UNEP) November 2005 prediction that there would be as many as 50 million climate refugees by 2010? Not only did those displaced populations fail to materialize, some of the areas UNEP supposed would be hardest hit by climate change impacts experienced rapid population increases. Something similar is going on right here in the USA. Decade by decade, millions of Americans vote with their feet to live in warmer climates.

U.S census data show that the largest percent increases in population are in the relatively dry and hot Pacific Southwest, the moist and hot southeast Texas, and the Florida peninsula.

But ‘everybody knows’ that global warming is the worst threat facing humanity. Okay then explain this: Why do U.S. (and global) population, per capita income, and life expectancy keep rising along with carbon dioxide emissions?

U.S. carbon dioxide emissions, population, GDP per capita (affluence) and life expectancy at birth, 1900-2009. [Source: Goklany, I.M. 2009. Have increases in population, affluence and technology worsened human and environmental well-being? The Electronic Journal of Sustainable Development 1(3), updated using the Statistical Abstract of the United States 2011, and National Vital Statistics Report 59 (4): 1; CDIAC (2010); GGDC (2010)]

Well, that should be enough to whet your appetite to read Addendum. I’ll conclude this post by reproducing the draft report’s ”key findings.”

Key Findings:

1. Climate change is unequivocal, and human activity plays some part in it. There are two periods of warming in the 20th century that are statistically indistinguishable in magnitude. The first had little if any relation to changes in atmospheric carbon dioxide, while the second has characteristics that are consistent in part with a changed greenhouse effect. (p. 17)
2. Climate change has occurred and will occur in the United States. U.S. temperature and precipitation have changed significantly over some states since the modern record began in 1895. Some changes, such as the amelioration of severe winter cold in the northern Great Plains, are highly consistent with a changed greenhouse effect. (pp. 38–56, 187–92)
3. Impacts of observed climate change have little national significance. There is no significant long-term change in U.S. economic output that can be attributed to climate change. The slow nature of climate progression results in de facto adaptation, as can be seen with sea level changes on the East Coast. (pp. 48–49, 79–81, 155–58, 173–74)
4. Climate change will affect water resources. Long-term paleoclimatic studies show that severe and extensive droughts have occurred repeatedly throughout the Great Plains and the West. These will occur in the future, with or without human-induced climate change. Infrastructure planners would be well-advised to take them into account. (pp. 57–71)
5. Crop and livestock production will adapt to climate change. There is a large body of evidence that demonstrates substantial untapped adaptability of U.S. agriculture to climate change, including crop-switching that can change the species used for livestock feed. In addition, carbon dioxide itself is likely increasing crop yields and will continue to do so in increasing increments in the future. (pp. 102–18)
6. Sea level rise caused by global warming is easily adapted to. Much of the densely populated East Coast has experienced sea level rises in the 20th century that are more than twice those caused by global warming, with obvious adaptation. The mean projections from the United Nations will likely be associated with similar adaptation. (pp. 173–74)
7. Life expectancy and wealth are likely to continue to increase. There is little relationship between climate and life expectancy and wealth. Even under the most dire climate scenarios, people will be much wealthier and healthier in the year 2100 than they are today. (pp. 139–45, 158–61)
8. Climate change is a minor overlay on U.S. society. People voluntarily expose themselves to climate changes throughout their lives that are much larger and more sudden than those expected from greenhouse gases. The migration of U.S. population from the cold North and East to the much warmer South and West is an example. Global markets exist to allocate resources that fluctuate with the weather and climate. (pp. 154–69)
9. Species and ecosystems will change with or without climate change. There is little doubt that some ecosystems, such as the desert West, have been changing with climate, while others, such as cold marine fisheries, move with little obvious relationship to climate. (pp. 119–38, 208)
10. Policies enacted by the developed world will have little effect on global temperature. Even if every nation that has obligations under the Kyoto Protocol agreed to reduce emissions over 80 percent, there would be little or no detectable effect on climate in the policy-relevant timeframe, because emissions from these countries will be dwarfed in coming decades by the total emissions from China, India, and the developing world. (pp. 28, 211)