2009

In a magnificent display of self-delusion, the green movement is holding a demonstration at the Capitol’s power plant today to protest the continued use of coal to keep people warm. Although I’d love to put the continued operation of Congress at the mercy of the weather, there is a more important point here. Coal is Affordable energy increases people’s income, keeps them in jobs, and keeps them alive. Here is a brief summary of some important research on the subject.

The Human Consequences of Global Warming Alarmism

• Raising energy costs kills. According to a Johns Hopkins study, replacing ¾ of US coal-based energy with higher priced energy would lead to 150,000 extra premature deaths annually in the US alone.
• Reducing emissions hits the poorest hardest. According to the recent report by the Congressional Budget Office, a cap and trade system aimed at reducing emissions by just 15 percent will cost the poorest quintile 3 percent of their annual household income, while benefiting the richest quintile.
• Raising energy costs loses jobs. According to a Penn State study, replacing 2/3 of US coal-based energy with higher priced energy will cost almost 3 million jobs, and perhaps over 4 million.

More detailed points

• We are already seeing the adverse effects of global warming policies in the ethanol debacle. Ethanol mandates have not just contributed to the spike in the price of gas, but have also increased food prices. Steaks are up 5.5% from a year ago, chickens up 7.7%. These increased costs force the poorest to make hard choices.
• The ethanol mandates also demonstrate that consumer behavior can’t be fine tuned. As fuel and food prices increased, the choices people made showed that they sacrifice food for fuel. A survey by the Food Marketing Institute found that more than 40% of consumers changed their food-buying habits in response to high gas prices. That illustrates that energy is one of the most important purchases they make.
• Coal production is also fundamental to the US economy. The Penn State study found that by 2015, coal production, transportation and consumption will contribute $1 trillion to the US economy and provide 6.8 million jobs and $362 billion in household income.
• That same study shows pronounced regional variations. If coal production was curtailed by 2/3rds, California would be hard hit. It would lose $58 million in economic activity. California households would lose $22 million a year. And 339,000 Californians would lose their jobs.
• But the states of the Central US would be worst hit – Arkansas, Iowa, Kansas, Louisiana, Minnesota, Missouri, Nebraska, Oklahoma and Texas would lose 1.5 million jobs between them.
• Legislators must consider the unintended effects of their actions. If coal production is to be stamped out, the railroad industry in this country would probably collapse along with it. Without rail transport, other bulk commodities would rise in price. And they would increase congestion on the roads, which don’t have enough capacity to deal with freight transport as it is.

Background: Lives Lost

The Johns Hopkins study (Harvey Brenner, “Health Benefits of Low Cost Energy: An Econometric Case Study,” Environmental Manager, November 2005) found the following:

An econometric model was applied to a hypothetical regulatory case study, whereby U.S. coal was replaced by alternative higher-cost fuels such as natural gas for the purpose of electricity generation. The model was used to estimate the premature mortality associated with increased unemployment and reduced personal income. The adverse impacts on household income and unemployment due to the substitution of higher-cost energy sources were estimated to result in 195,000 additional premature deaths annually

The results from this hypothetical case study may be scaled to apply to specific policy initiatives affecting the U.S. coal-based electricity generation sector. For example, the U.S. Department of Energy’s Energy Information Administration (EIA) estimates that climate change bills currently before the U.S. Congress—such as Senate Amendment No. 2028, rejected by the Senate in 2003 and again in June 2005—could result in the displacement of up to 78% of U.S. coal-based electricity generation with higher-cost energy sources. The methodology employed here suggests that, absent any direct mitigation measures to offset expected decreases in employment and income, implementation of such measures could result in an annual increase of premature mortality rates by more than 150,000.

Background: Job, Income and Economic Impacts

The Penn State study (Rose, A.Z., and Wei, D., “The Economic Impact of Coal Utilization and Displacement in the Continental United States, 2015,” Pennsylvania State University, July 2006) found the following:

Assigning equal weight to each of the two energy price scenarios, we estimate that U.S. coal-fueled electric generation in 2015 will contribute:

• $1.05 trillion (2005 $) in gross economic output;
• $362 billion in annual household incomes, and
• 6.8 million jobs.

We also estimated the prospective net economic impacts of the “displacement” of coalfueled electricity generation at assumed levels of 66% and 33% from a projected 2015 base.

These levels of displacement are consistent with some of the potential impacts of major environmental policy initiatives in climate change or other areas. In these cases, we again calculated backward linkage and price differential effects to determine potential negative impacts on each state’s economy.

Additionally, we calculated potential positive economic benefits due to the operation of replacement electricity generation of various types. In all states, the net effect of displacing coal-based electricity was negative for the “high-price” scenarios, and in nearly all states, the net effect was negative for the “low-price” scenarios…

Assigning equal weight to the high- and low-price scenarios, we estimate the average impacts of displacing 66% of coal-fueled generation in 2015 at:

• $371 billion (2005 $) reduction in gross economic output;
• $142 billion reduction of annual household incomes; and
• 2.7 million job losses.

Assigning equal weight to the high- and low-price scenarios, we estimate the average impacts of displacing 33% of coal-based generation in 2015 at:

• $166 billion (2005 $) reduction in gross economic output;
• $64 billion reduction of annual household incomes; and
• 1.2 million job losses.

“Not one dime,” said President Obama in his address to Congress, referring to how much extra tax people earning under $250,000 a year will have to pay in his budget. Unfortunately, even if you don’t have to pay extra tax, you will have to pay extra fees for your energy, which are passed on to the government via energy companies. That’s the effect of the President’s cap-and-trade scheme for carbon emissions, an important part of his new budget. Energy companies will have to pay the government for permits for each ton of carbon dioxide or equivalent they emit in the generation of power. They will pass on these costs to the consumer, as has happened everywhere a cap-and-trade scheme has been tried. The Administration will split the revenues between $15bn for alternative energy pork and about $52 billion per year to help pay for the Making Work Pay tax cut/welfare check of $800 for “95 percent of all American workers.” By raising the price of fossil fuel energy and thereby making expensive alternative energy more competitive, the program is also aimed at reducing the amount of greenhouse gases emitted.

How much will cap and trade cost households in increased energy costs? Well, we know from a CBO study last year that a 15 percent reduction in emissions from 1998 levels would cost each household at least $660. That target is about 25 percent more stringent than the budget target, which is simply a return to 1990 emission levels by 2020 (far less than environmentalists demand). So we can apply simple arithmetic to estimate that the current budget cap and trade program will cost each income quintile $510, $660, $870, $1125 and $1635 (in 2006 dollars, slightly more in nominal values) respectively. This is a significant offset to the $800 “tax cut” per worker.

To those who might object that most households have two income earners these days, that’s not true. While the “traditional” family model of a husband supporting his family only accounts for 7 percent of householders now, dual-income families actually account for just 29 percent of households. Moreover, it is the bottom three quintiles that have on average just one earner, meaning that they suffer proportionally more from this energy tax increase.

Finally, for the highest quintile, the lower income limit is just $88,000. If you earn that amount, even if you have two income earners in the household, you will likely lose money from these stealth energy taxes. So will the average household earning between $35,000 and $55,000. So much for “not one dime.”

A cap-and-trade scheme is a lobbyist’s dream. For those of you unacquainted with how these boondoggles work, it goes something like this: (1) regulators assign an emissions quota to tens of thousands of individual industrial suppliers and users of energy (because emissions are synonymous with conventional energy use, an emissions “cap” is the same as energy rationing); (2) these businesses then purchase the right to emit their allotment in the form of permits disbursed by a government-run auction; (3) these businesses are allowed to trade permits among themselves (ie, a company that exceeds its emissions quota can buy permits from a company that emitted less than its quota); and (4) the government spends revenue raised in the auction of emissions permits-as much as $300 billion a year, according to the Congressional Budget Office-on green technologies and mitigation of the cap-and-trade’s adverse economic impact.

Lobbyists love cap-and-trade because of its complexity. At every step of the process, there are myriad nooks and crannies into which they can stuff special favors for their corporate clients. Industrial suppliers and users of energy will hire lobbyists to claim that they deserve free permits for some reason or another. And the auction-generated revenue would create a huge money trough coveted by every conceivable special interest and their pricey lobbyists.

Given that the President last night announced that legislation for “a market-based cap” on greenhouse gas emissions is a priority for his administration, it should come as no surprise that there has been an explosion in climate lobbying on Capitol Hill. According to an article in today’s Politico,

“A Center for Public Integrity analysis of Senate lobbying disclosure forms shows that more than 770 companies and interest groups hired an estimated 2,340 lobbyists to influence federal policy on climate change in the past year, as the issue gathered momentum and a bill came to a vote in Congress.

That’s an increase of more than 300 percent in the number of global warming lobbyists since 2003, when Congress previously voted on climate change legislation, and means that Washington can now boast more than four climate lobbyists for every member of Congress.”

Let that last line sink in: Four climate lobbyists for every member of Congress!

The House and the Senate held competing A-list hearings on global warming on Wednesday at 10AM. Testifying before the Senate Environment and Public Works Committee was Dr. Rajendra K. Pachauri, the Chairman of the Intergovernmental Panel on Climate Change. Testifying before the House Ways and Means Committee was Dr. James E. Hansen, whom the committee described as an Adjunct Professor at Columbia University’s Earth Institute. He is of course also Director of NASA’s Goddard Institute for Space Studies. I tried to watch both hearings on the internet and thereby undoubtedly missed a lot of good stuff as I switched back and forth. Interestingly, Pachauri, an economist and engineer, talked mostly about global warming science, while Hansen, an astronomer, talked mostly about economics. Pachauri was utterly dreary. Hansen was an interesting mix. He inveighed against cap-and-trade as an ineffective scam designed to pay off big business. He instead endorsed a stiff carbon tax with 100% of revenues rebated to consumers.

When asked by Rep. Earl Pomeroy (D-ND) about what would happen to North Dakota and its near-total reliance on brown coal for producing electricity, Hansen said that employment in the coal industry would go down, but that North Dakota had lots of potential for wind power and potentially for growing well-designed bio-fuels. He observed that these new industries might create more jobs than would be lost in the coal industry. That is true. One of the ways to create jobs is to make production and use of capital less efficient. For example, there would be tens of millions, probably even hundreds of millions, of new jobs in North Dakota and throughout rural America if mechanized agriculture were banned. Then the federal government could throw billions of dollars of taxpayer money into improving farming technology. Think of the breakthroughs that could be made with revolutionary new horse-drawn plows, etc.

The Republican witnesses—Professor William Happer at the Senate hearing and Professor John Christy at the House hearing—were articulate, intelligent, and scientifically accurate. Christy made a strong case against energy poverty. Naturally, most Senators and Representatives were unimpressed and unhappy with them.

In his first address to Congress, President Obama said that the “stimulus” legislation and other short-term economic policies were necessary to prevent a decade-long recession. He then went on to advocate energy and global warming policies that will foster a perpetual recession. First, he promised that federal funding and mandates will make the United States the world leader in renewable energy technologies. As an article that might have been published in the Onion but actually appeared in the Los Angeles Times last week noted, the only thing holding renewable energy technologies back is a number of necessary technological breakthroughs that will make them work. Apparently, our President is too young to have learnt that the federal government has been throwing taxpayer money at renewables since the 1970s.

The President then called on the Congress to send him cap-and-trade legislation that would make renewable energy profitable by raising the price of conventional energy produced from burning coal, oil, and natural gas. Yes, renewable energy will become profitable, many jobs will be created, and we’ll have to settle for a significantly lower standard of living as a result. The sad fact is that the new Administration has some highly-regarded establishment Democratic economists in it, but is for some reason pursuing economically illiterate and consequently disastrous policies.

“A Matter of Fact,” a new report from the Center for American Progress Action Fund, challenges the Washington Post to correct George F. Will’s “Dark Green Doomsayers” column, published February 15^th. The report, by CAP’s Brad Johnson, asserts that George Will made three factual errors:

• Current “global sea ice levels” equals those of 1979
• There hasn’t been warming in “more than a decade”
• “Global cooling” joins a list of well publicized “planetary calamities that did not happen.”

Will’s column is not perfect, and Johnson raises some valid questions. For the sake of intellectual honesty, however, Johnson should broaden his fact-checking scope to incorporate misstatements on both sides of the global warming debate—including his own fudging of the truth.

But first, let’s address CAP’s critique of Will’s column.

Error 1. It seems that Will is guilty of delay. On the one hand, the University of Illinois Arctic Climate Research Center, the source of his assertion that global sea ice levels haven’t changed in 30 years, publically disavowed Will’s claims. On the other, ACRC reported on January 1, 2009 that global sea ice levels were “near or slightly lower than those observed in late 1979.” Will’s column appeared 45 days later, during which the discrepancy between current levels and 1979 levels grew by 8%.  If anything, this demonstrates the perils of reporting on an ever-changing global climate.

Error 2. CAP and George Will have it wrong. Will wrote that it hasn’t warmed in “more than a decade,” while Brad Johnson claims that “global warming is continuing.” According to data from the University of Alabama in Huntsville, compiled by NASA’s Dr. Roy Spenser, there has been no statistical warming of lower atmosphere temperatures over the past seven years, despite the fact that global greenhouse gas emissions have increased.

Error 3. Will is right and CAP is wrong. Johnson notes that there was never a “scientific consensus” on global cooling, but that’s not what Will claimed. He only wrote that some scientists and media outlets warned of global cooling, which is true.

I am an unabashed global warming “denier,” but I nonetheless applaud Brad Johnson’s efforts. On the topic of global warming, misrepresentations of the science abound, and we in the energy/global warming policy community should root them out and expose them with vigilance.

With that in mind, I have a “Matter of Fact” list of my own:

Fiction: Al Gore claims in his documentary, An Inconvenient Truth, that “there is one relationship that is more powerful than all the others and it is this. When there is more carbon dioxide, the temperature gets warmer ….”

Fact: It hasn’t warmed in 7 years, despite a steady increase in global greenhouse gas emissions. Where’s the Warming, Al?

Fiction: Dr. James Hansen, ultra-alarmist, has suggested that a 2-3 degree warming would cause sea levels to rise by 80 feet. Hansen then lowered his estimation to 20 feet. His most recent estimate is “at least” 3.2 to 6.4 feet.

Fact: The preeminent body of climate scientists, the Intergovernmental Panel on Climate Change, suggests that a 2-3 degree warming would cause sea levels to rise 7 to 23 inches.

Fiction: In 1986, Dr. John P Holdren, President Barack Obama’s choice to become White House Science Adviser, is quoted as having said that global warming could cause the deaths of 1 billion human beings by 2020. During his confirmation hearing two weeks ago, Holdren was questioned about this claim, and said that “it is still possible.”

Fact: To fulfill Holdren’s alarmist warning, climate change would have to kill twice as many people as died in World War Two, each year, for the next ten years.

Fiction: The Center for American Progress’s Brad Johnson last summer reported that the death of two Boy Scouts in Iowa was “evidence” of “the consequences” of global warming.

Fact: As recently noted on Roger Pielke Jr’s Prometheus, the Center for Research on the Epidemiology of Disasters cautions that “justifying the upward trend in hydro-meteorological disaster occurrence and impacts essentially through climate change would be misleading.”