Industry views: Five Troubling Aspects of the Copenhagen Accord

Five Troubling Aspects of the Copenhagen Accord

IER, December 21, 2009

Even though the climate change PR machines are spinning away in the aftermath of Copenhagen’s COP 15, a few of the Copenhagen Accord’s more troubling consequences are not getting the attention they deserve.

Senator McCain called “the agreement to take note of the accord” reached by the United States and a handful of developed nations a “nothing burger.” Senator Kerry, on the other hand, believes the accord is important and called China’s participation “the most critical thing” to ensuring Senate passage of the national energy tax, even though few observers believe China will actually do anything to curtail their growing use of carbon-based energy. Meanwhile, the question of whether the outcome in Denmark was enough to advance international efforts to control emissions can best be summarized by Henry Derwent, president of the Geneva-based International Emissions Trading Association, who noted that the climate talks were a “step backward” in terms of a signal that will support carbon prices.

While the Copenhagen Accord does not represent a major change from the status quo, there are a few troubling aspects of the U.S. effort in Copenhagen worth noting.

First, U.S. negotiators opposed efforts from China and India to ban the use of border tariffs on energy-intensive exports. That means the U.S. actively fought to leave the prospect of Smoot-Hawley-type trade wars on the table for Senate cap-and-trade negotiators. The United States has benefited greatly from free trade; now the U.S. government is opposing free trade.

Second, unlike China and other developing countries, the U.S. will allow “international consultations and analysis” of our greenhouse gas emissions. It is not clear how intrusive these international consultations will be, but with millions of sources of greenhouse gas emissions, it’s hard to believe that they won’t in some way encroach on U.S. sovereignty.

Third, the U.S.’s commitment to hand over billions of dollars a year in taxpayer money was a premature gesture that will only serve as the new floor for developing nations in the next round of international talks. Why would nations in the third world operate under this agreement if they can now see that the starting point for COP 16’s bargaining talks is $30 billion?

Fourth, we must consider the sheer size of the U.S. delegation; press accounts reveal that in addition to the President, five cabinet officials, four other high ranking officials, one czar, over thirty Members of Congress and a host of staff attended all or part of the conference. The United States spent millions to send a small army to Copenhagen to forge a non-binding “accord” that very few Americans view as a priority.

Finally, contrary to Senator Kerry’s hopes, China’s willingness to sit at a non-binding negotiating table will not ease the pain a national energy rationing cap-and-trade tax will cause for American families and is certainly not a sufficient gesture to justify its passage.

Ultimately, Copenhagen will have no impact on the outcome of the cap-and-trade legislation moving through Congress. As we have just seen in the health care debate, Senate passage of this increasingly unpopular measure will depend on how much taxpayer money Majority Leader Reid is willing to give away to his fence-sitting colleagues to reach the 60 votes necessary to move this bill forward.

Why Sustainability Standards for Biofuel Production Make Little Economic Sense

Why Sustainability Standards for Biofuel Production Make Little Economic Sense. By Harry de Gorter and David R. Just
Cato, October 7, 2009

The federal "sustainability standard" requires ethanol to emit at least 20 percent less carbon dioxide (CO2) than gasoline. Recent rulings by California and the Environmental Protection Agency, however, have cast doubt on the methodology of the sustainability calculus and whether those standards are being met. We show that the methodological debate is misplaced because sustainability standards for ethanol are, by definition, illogical and ineffective. Moreover, those standards divert attention from the contradictions and inefficiencies of ethanol import tariffs, tax credits, mandates, and subsidies, all of which exist whether ethanol is sustainable or not.

Ethanol is sustainable by definition. The CO2 sequestered by growing corn is exactly offset by the CO2 emissions that follow from burning the fuel in a car. The same observation applies to, say, consuming bourbon made from corn, but ethanol can replace energy — bourbon cannot. Hence, any sustainability standard should be applied to all corn and other crop products, and not just ethanol.

Sustainability standards are based on "lifecycle accounting," in which ethanol is assumed to replace gasoline; but in fact, it may be replacing coal or other energy sources. Life-cycle accounting also fails to recognize that if incentives are given for ethanol producers to use relatively "clean" inputs (e.g., natural gas), the "dirtier" inputs (e.g., coal) that might otherwise have been used for the ethanol production will simply be used by other producers to make products that are not covered by the sustainability standard. Sustainability standards reshuffle who is using what inputs — with no net reduction in national emissions.

Finally, sustainability standards are discriminatory under World Trade Organization law and are unlikely to survive a legal challenge from ethanol producers abroad. The United States will not be able to rely on the World Trade Organization's exception for trade laws protecting the environment because of lax U.S. policies dealing with greenhouse gas emissions relative to its trading partners. Moreover, the imposition of U.S. tariffs on more climate-friendly ethanol produced abroad weakens any U.S. defense of ethanol sustainability standards under the WTO.

Full text: http://www.cato.org/pubs/pas/pa647.pdf

Harry de Gorter and David R. Just are economists in the Department of Applied Economics and Management at Cornell University.

Federal Pres Says Danes Receive 20% of Their Power Via Wind; New Study Tells Different

Something Rotten? Obama Says Danes Receive 20% of Their Power Via Wind; New Study Tells the Real Story
Danish experts visit Washington this week to explain to American audiences what’s really happening in Denmark
IER, Sep 15, 2009

WASHINGTON – President Obama has frequently cited Denmark as an example to be followed in the field of wind power generation, stating on several occasions that the Danes satisfy “20 percent of their electricity through wind power.” The findings of a new study released this week cast serious doubt on the accuracy of that statement. The report finds that in 2006 scarcely five percent of the nation’s electricity demand was met by wind. And over the past five years, the average is less than 10 percent — despite Denmark having ‘carpeted’ its land with the machines.
“As climate officials descend upon Copenhagen later this year to continue their work to engineer a world in which energy is rendered less reliable, less affordable and increasingly scarce, the eyes of the world will naturally fall upon the host country as well,” said Thomas J. Pyle, president of the Institute for Energy Research (IER), which commissioned the report.

“In the case of Denmark,” added Pyle, “you have a nation of 5.4 million, occupying some of the most wind-intense real estate in the world, whose citizens are forced to pay the highest electricity rates in Europe — and it still doesn’t even come close to the 20 percent threshold envisioned by President Obama for the United States. This may indeed be the model for the future – but only if you believe that a combination of smoke, mirrors and prohibitively high utility rates are the key to our economic and environmental salvation.”

Prepared by the independent Danish think tank CEPOS and co-authored by economist Henrik Meyer and Hugh Sharman, a prominent Denmark-based international energy consultant, the report details the extent to which Denmark’s claim to wind superiority is essentially founded on a myth – the function of a complicated trading scheme in which the Danes off-load excess, value-subtracted wind generation to other nations for roughly free, asking only in return that these countries sell some of their baseload power back to Denmark on the frequent occasions in which the wind does not blow there

The upshot? The Danes retain the title of world’s most prolific wind producer, and President Obama cites their experience as a path to be followed. The cost? Danish ratepayers are forced to pay the highest utility rates in Europe. And the American people are led to believe that, though wind may only provide a little more than one percent of our electricity now, reaching a 20 percent platform – as the Danes have allegedly done – will come at no cost, with no jobs lost and no externalities to consider.

Speaking of jobs, the report also pulls back the curtain on the wind power industry’s near-complete dependence on taxpayer subsidies to support the fairly modest workforce it presently maintains. Just as in Spain, where per-job taxpayer subsidies for so-called “green jobs” exceeds $1,000,000 per worker in some cases, wind-related jobs in Denmark on average are subsidized at a rate of 175 to 250 percent above the average pay per worker. All told, each new wind job created by the government costs Danish taxpayers between 600,000-900,000 krone a year, roughly equivalent to $90,000-$140,000 USD.

“That the current political leadership in Washington is enamored of the European energy model has been made abundantly clear — from the president himself, all the way on down,” added Pyle. “Less clear is the extent to which these people actually know what’s taking place over there, and whether they’re willing to level with the American people about the serious costs associated with following this dubious path.”

On Tuesday, report co-author Hugh Sharman will join CEPOS chief executive officer Martin Agerup in Washington, D.C., part of a three-day tour (Tues-Thurs) aimed at explaining to a wider American audience the core conclusions of their report. Those interested in speaking with Messrs. Sharman and/or Agerup or setting up an interview should contact Patrick Creighton (202.621.2947) or Chris Tucker (202.346.8825).

Germany and the U.K. resist France and the U.S. on green tariffs

Resisting Green Tariffs. WSJ Editorial
Germany and the U.K. resist France and the U.S. on green tariffs.
WSJ, Jul 28, 2009

One of the most dangerous but least reported undercurrents of the global-warming movement is trade protectionism. Now some politicians in Europe are beginning to push back, and we’re delighted to see it.

A carbon tariff has been popular on the intellectual left for some time, as a way to sell heavy new energy taxes to Western voters worried that their jobs will get shipped to countries that don’t also punish carbon use. The U.S. House of Representatives wrote a tariff provision into its recent cap-and-tax bill, rolling over the muted objections of President Obama. Coming from the world’s largest economy and ostensible free-trade leader, the bill is an invitation to the world’s protectionists to camouflage their self-interest in claims of green virtue.

French President Nicolas Sarkozy—a mercantalist in the best of times—escalated the threat last month by suggesting import duties to “level the playing field” with countries that oppose binding greenhouse-gas targets at December’s United Nations climate talks in Copenhagen. Just what a world trying to rebound from recession needs: beggar-thy-neighbor environmentalism.

Now other leaders are beginning to recognize and speak up about the peril. With typical British understatement, U.K. Secretary of State for Energy and Climate Change Ed Miliband said Saturday his government was “skeptical” about the French proposal for carbon tariffs. Germany’s Deputy Environment Minister Matthias Machnig was even more forthright on Friday, branding the exercise as “eco-imperialism” for attempting to punish countries that don’t follow these green dictates. “We are closing our markets for their products, and I don’t think this is a very helpful signal for the international negotiations,” he added. Both statements are notable coming as they do from parties on the political left.

Berlin’s criticism is especially important. Germany has been at the forefront of Europe’s eco-movement from the start, enriching the French language with such words as “le Waldsterben,” a German compound meaning “forest death.” The idea of the man-made destruction of Europe’s trees was the great green scare of the 1970s and 1980s. The forests are still with us, and scientists now believe that the tree decline was as much due to natural phenomena as to “acid rain.” That episode is a lesson in the need for skepticism about proposals that would do tangible economic harm in the heat of environmental manias.

A climate tariff would be damaging even on its own green terms. To the extent it reduced global trade, carbon protectionism would slow the rise in income that we know from the last half century has been crucial to antipollution progress. The richer people are, the more of their income they are willing to devote to cleaner air and water. Several hundred million people have risen from poverty in the last generation thanks to expanding trade, and the world doesn’t need a reversal thanks to old-fashioned protectionism dressed in green drag.

India Picks Economic Growth Over Carbon Dioxide Caps

India Picks Economic Growth Over Carbon Dioxide Caps
IER, July 27, 2009

The Obama Administration and European governments continue to lobby developing countries, such as India and China, to reduce their carbon dioxide emissions. But India and China reject these calls because they understand that artificial restrictions on carbon dioxide emissions will harm their economies.

During her recent visit, India’s Environment Minister reminded Secretary of State Hillary Clinton that India would not accept caps on their carbon dioxide emissions. According to the Washington Post:

But the clash between developed and developing countries over climate change intruded on the high-profile photo opportunity midway through Clinton’s three-day tour of India. Indian Environment Minister Jairam Ramesh complained about U.S. pressure to cut a worldwide deal, and Clinton countered that the Obama administration’s push for a binding agreement would not sacrifice India’s economic growth.

As dozens of cameras recorded the scene, Ramesh declared that India would not commit to a deal that would require it to meet targets to reduce emissions. “It is not true that India is running away from mitigation,” he said. But “India’s position, let me be clear, is that we are simply not in the position to take legally binding emissions targets.” [emphasis added]

It is refreshing to see that at least some government officials—though not from this country – understand that when you take options away from businesses, you reduce economic activity. If it were really true, as Secretary of State Clinton alleges, that reducing emissions will actually spur job creation and economic growth, then why would the government need to force its plan on the private sector? (See video.)

Furthermore, why stop with caps on carbon dioxide emissions? Why not impose a cap-and-trade plan on the use of steel? All those businesses currently using steel as an input would then have to scramble to find higher-priced substitutes, and this would create jobs in the plastics industries.

Of course the above “logic” is nonsense. Steadily shrinking the cap on permissible emissions will hamper U.S. economic growth and because businesses will be forced to switch to lower-carbon-intensive techniques than they otherwise would have chosen, their output will be lower and the productivity of labor will fall. That is, of course, the intent of the proponents of cap and trade plans including the Waxman-Markey bill that recently passed in the House of Representatives. The so-called “green jobs” created in some sectors, such as wind turbines and solar panels, will be counterbalanced by job destruction in other sectors that rely on fossil fuels and inexpensive energy.

Indian officials have it exactly right: They are being asked to sacrifice the welfare of their own citizens by Western leaders whose countries were built on a foundation of abundant energy.
India’s declaration also undermines the entire rationale for the Waxman-Markey bill. Taken in isolation, some experts contend that the Waxman-Markey caps on U.S. emissions will have virtually no impact on the trajectory of global warming, even taking the standard climate models at face value. Even the most outspoken scientists on global warming agree that unilateral American efforts are pointless, without similar targets being adopted by the developing world.

Proponents of cap and trade have justified its economically crippling, yet environmentally irrelevant, constraints on the U.S. by saying it will provide American negotiators with moral authority when seeking worldwide restrictions on industry. The idea is that we need to impose limits on the U.S. economy before other governments will agree to shackle their own economies in turn.

India, rightly so, has just declared that it will do no such thing. Let us hope that our leaders see the flaws in their logic and reverse course on this job-killing cap and trade plan before it is too late.

The economic reality of climate-change policy is sinking in at last in Europe

European Hot Air. WSJ Editorial
The economic reality of climate-change policy is sinking in at last.
WSJ, Jul 08, 2009

Climate change is set to figure prominently in this week's Group of Eight summit in Italy, but take any pronouncements about greenhouse-gas emissions targets with a grain of salt. While leaders may still think it's good politics to sing from the green hymnal, other realities are finally starting to sink in, especially in Old Europe. To wit: Restrictions on greenhouse-gas emissions involve huge costs for uncertain gains and are just what economies in recession don't need.

Concerns about high costs and lost jobs have already threatened carbon-emissions control plans in Australia and New Zealand, and to make sure cap-and-trade would pass in the U.S. House of Representatives, supporters had to push through the legislation before anyone could read it. The fraying of the anti-carbon consensus in Western Europe is especially striking. Polls consistently show that voters in most Western European countries support attempts to ameliorate climate change, at least in the abstract. The EU implemented a cap-and-trade Emissions Trading Scheme in 2005.

But that enthusiasm may be reaching its limit. Governments in industry-heavy countries are now less willing to sacrifice jobs for cooler temperatures. Germany's generally environmentalist Chancellor Angela Merkel insisted on exemptions for her country's industry from December's EU climate package, which pledged to reduce carbon emissions by 20% below 1990 levels by 2020. Germany also plans to build several dozen coal-fired power plants in the next few years.

Italy insisted on a clause in the December climate deal that requires the EU to renegotiate its climate policy after the United Nations summit in Copenhagen later this year. That amounts to a veto since China and India aren't expected to sign up for aggressive emissions targets; any renegotiated EU deal is likely to contain even more loopholes and exemptions to keep from denting European competitiveness.

Just as telling, Europe has been at best half-hearted in meeting its emissions-reduction targets under the 1997 Kyoto Protocol. To the extent Europe appears on track to meet its targets, it's largely because warmer weather and higher market prices for energy have driven consumption down.

Credit a deteriorating economy for this about-face. Businesses and unions finally are starting to speak out against intrusive and expensive emissions regulations. In December, Phillipe Varin, chief executive of Corus, Europe's second-largest steel producer, told the London Independent that the cost of carbon credits and new technologies needed to reduce emissions would destroy European steel production, forcing manufacturing overseas.

Jaroslaw Grzesik, deputy head of energy at Poland's Solidarity trade union said last month that the union estimated the EU's climate policy would cost 800,000 European jobs. Before the December negotiations, the London-based think tank Open Europe estimated the EU climate package would cost governments, businesses and householders in the EU-25 more than €73 billion ($102 billion) a year until 2020. No wonder leaders decided to water it down.

Meanwhile, the supposed economic benefits of climate-change amelioration are evaporating. In Germany, government subsidies for installing solar panels -- and, it was presumed, thereby creating domestic manufacturing jobs -- backfired when it turned out that it was cheaper to make solar panels in China. A recent paper by Gabriel Calzada Álvarez, an economics professor at Universidad Rey Juan Carlos, said that since Spain starting investing in "green jobs" policies in 2000, the country has lost 110,500 jobs in other parts of the economy. That amounts to 2.2 jobs lost for every new "green job" created.

This has politicians worried. They might have been willing to sacrifice a few jobs when they signed Kyoto in 1997. But economic times were flush then. Now a global slowdown is forcing a rethink on whether emissions control is worth the cost. With the scientific debate about the causes, effects and solutions of climate change growing more vigorous, that's a question worth asking.

Despite all the backtracking in practice, climate rhetoric is still alive and well. Sweden, which assumed the EU presidency last week, promises more action on emissions control. Gordon Brown, Nicolas Sarkozy and other leaders continue to talk a good game. Mr. Brown has even proposed a $100 billion-a-year fund to help countries like China and India clean up their emissions acts. Good luck getting that passed in the current fiscal and economic environment.

In other words, Western European leaders are the latest to discover that climate-change talk is cheap, but carbon-emissions regulation is expensive. That might be bad news for green activists, but it's very good news for Europeans worried about their jobs and their economy.

Ethanol and biofuels get 190 times as much subsidies as natural gas and petroleum liquids

So Much for 'Energy Independence.' By ROBERT BRYCE
The Wall Street Journal, Jul 07, 2009, p A15

Whenever you read about ethanol, remember these numbers: 98 and 190.

They offer an essential insight into U.S. energy politics and the debate over cap-and-trade legislation that recently passed the House. Here is what the numbers mean: The U.S. gets about 98 times as much energy from natural gas and oil as it does from ethanol and biofuels. And measured on a per-unit-of-energy basis, Congress lavishes ethanol and biofuels with subsidies that are 190 times as large as those given to oil and gas.

Those numbers come from an April 2008 report by the Energy Information Administration: "Federal Financial Interventions and Subsidies in Energy Markets 2007." Table ES6 lists domestic energy sources that get subsidies. In 2007, the U.S. consumed nearly 55.8 quadrillion British Thermal Units (BTUs), or about 9.6 billion barrels of oil equivalent, in natural gas and oil. That's about 98 times as much energy as the U.S. consumed in ethanol and biofuels, which totaled 98 million barrels of oil equivalent.

Meanwhile, ethanol and biofuels are getting subsidies of $5.72 per million BTU. That's 190 times as much as natural gas and petroleum liquids, which get subsidies of $0.03 per million BTU.
The report also shows that the ethanol and biofuels industry are more heavily subsidized -- in total dollar terms -- than the oil and gas industry. In 2007, the ethanol and biofuels industries got $3.25 billion in subsidies. The oil and gas industry got $1.92 billion.

Despite these subsidies, the ethanol lobby is queuing up for more favors. And they are doing so at the very same time that the Obama administration and Congress are pushing to eliminate the relatively modest subsidies for domestic oil and gas producers. Democrats want to cut drilling subsidies while simultaneously trumpeting their desire for "energy independence."

The cap-and-trade bill passed by the House aims to "create energy jobs" and "achieve energy independence." Meanwhile, Democrats are calling to eliminate drilling subsidies that have encouraged advances in technology that have opened up vast new U.S. energy sources. These advances have made it profitable to extract natural gas from the Barnett Shale deposit in Texas and the Marcellus in Pennsylvania -- deposits once thought too expensive to tap.

President Barack Obama's 2010 budget calls for the elimination of two tax breaks: the expensing of "intangible drilling costs" (such as wages, fuel and pipe), which allows energy companies to deduct the bulk of their expenses for drilling new wells; and the allowance for percentage depletion, which allows well owners to deduct a portion of the value of the production from their wells. Those breaks provide the bulk of the $1.92 billion in oil and gas subsidies.

In May, Mr. Obama called the tax breaks for the oil and gas industry "unjustifiable loopholes" that do "little to incentivize production or reduce energy prices."

That's flat not true. The deduction for intangible drilling costs encourages energy companies to plow huge amounts of capital into more drilling. And that drilling has resulted in unprecedented increases in natural gas production and potential.

An April Department of Energy report estimated that the newly available shale resources total 649 trillion cubic feet of gas. That's the energy equivalent of 118.3 billion barrels of oil, or slightly more than the proven oil reserves of Iraq.

Eliminating the tax breaks for drilling will make natural gas more expensive. Tudor, Pickering, Holt & Co., a Houston-based investment-banking firm, estimates that eliminating the intangible drilling cost provision could increase U.S. natural gas prices by 50 cents per thousand cubic feet. Why? Because without the tax break, fewer wells will be drilled and less gas will be produced. The U.S. consumes about 23 trillion cubic feet of gas per year. Simple arithmetic shows that eliminating the drilling subsidies that cost taxpayers less than $2 billion per year could result in an increased cost to consumers of $11.5 billion per year in the form of higher natural gas prices.

Amid all this, Growth Energy, an ethanol industry front-group, is pushing the Environmental Protection Agency to adopt a proposal that would increase the amount of ethanol blended into gasoline from the current maximum of 10% to as much as 15%.

That increase would be a gift to corn ethanol producers who have never been able to make a go of it despite decades of federal subsidies and mandates. Growth Energy is also pushing the change even though only about seven million of the 250 million motor vehicles now on U.S. roads are designed to run on fuel containing more than 10% ethanol.

There is plenty of evidence to suggest that gasoline with 10% ethanol is already doing real harm. In January, Toyota announced that it was recalling 214,570 Lexus vehicles. The reason: The company found that "ethanol fuels with a low moisture content will corrode the internal surface of the fuel rails." (The rails carry fuel to the engine injectors.) Furthermore, there have been numerous media reports that ethanol-blended gasoline is fouling engines in lawn mowers, weed whackers and boats.

Lawyers in Florida have already sued a group of oil companies for damage allegedly done to boat fuel tanks and engines from ethanol fuel. They are claiming that consumers should be warned about the risk of using the fuel in their boats.

There is also corn ethanol's effect on food prices. Over the past two years at least a dozen studies have linked subsidies that have increased the production of corn ethanol with higher food prices.

Mr. Obama has been pro-ethanol and anti-oil for years. But he and his allies on Capitol Hill should understand that removing drilling incentives will mean less drilling, which will mean less domestic production and more imports of both oil and natural gas.
That's hardly a recipe for "energy independence."

Mr. Bryce is the managing editor of Energy Tribune. His latest book is "Gusher of Lies: The Dangerous Delusions of 'Energy Independence'" (PublicAffairs, 2008).

Pay More, Drive Less, Save the Planet

Pay More, Drive Less, Save the Planet. By GABRIEL ROTH
To fight climate change, Washington wants you to take a bus.
The Wall Street Journal, Jul 06, 2009, p A11

What is the appropriate response to Secretary of Transportation Ray LaHood, who as General Motors prepared to file for Chapter 11 bankruptcy protection declared that he wants to "coerce people out of their cars"? One might be inclined to dismiss these words as overkill -- except for recently introduced legislation by some congressional heavy-hitters that would take us down this road.

First there was the "Federal Surface Transportation Policy and Planning Act of 2009," introduced in May by Jay Rockefeller (D., W.Va.), chairman of the Senate Committee on Commerce, Science and Transportation, and Frank Lautenberg (D., N.J.), chairman of the Subcommittee on Surface Transportation. Next, in June, came the "Surface Transportation Authorization Act of 2009," introduced by James Oberstar (D., Minn.), chairman of the House Committee on Transportation and Infrastructure.

Messrs. Rockefeller and Lautenberg aim to "reduce per capita motor vehicle miles traveled on an annual basis." Mr. Oberstar wants to establish a federal "Office of Livability" to ensure that "States and metropolitan areas achieve progress towards national transportation-related greenhouse gas emissions reduction goals."

What does this mean? Most travel is not for its own sake. So reducing the total miles traveled -- whether the length or number of trips -- means people would have to reduce the activities they want and need to do. People would be "coerced," in effect, to live in less desirable places or work in less desirable jobs; shop in fewer and closer stores; see their doctor less frequently; visit fewer family members and friends.

There are three likely ways this could work. The cost of travel could be increased by raising the prices of vehicles or fuel; travel time could be increased by not expanding the highway system; or superior alternatives to the private car could be developed. The most likely way to increase the cost of travel would be by increasing fuel taxes perhaps to as much as $4 per gallon, as some have suggested.

Allowing congestion to increase travel times would be politically easier. In the name of "multimodal planning," for example, road-use taxes could be diverted, as Messrs. Rockefeller and Lautenberg suggest, to "increase the total usage of public transportation." But public transportation (where it's available) typically takes twice as long as automobile travel, so it's not practical for many Americans.

Moreover, public transportation (passenger rail services, subways, buses, light rail) requires heavy subsidies, while roads mostly pay for themselves through fuel taxes. Our roads would be even more self-sustaining if 20% of the federal fuel tax were not already diverted to public transit from the federal Highway Trust Fund. Messrs. Rockefeller, Lautenberg and Oberstar want to grab even more money from the trust fund.

Americans have always valued their independence and mobility. One way to reassert their rights would be to abolish the misnamed Highway Trust Fund, which finances highway construction and maintenance. Let the states decide what roads they need and how to finance them. The present system expires on Sept. 30 unless Congress reauthorizes it. Let it die.
Sen. Kay Bailey Hutchison (R., Texas) has in this regard introduced the "Highway Fairness and Reform Act of 2009," which would explicitly allow states to opt out of the federal financing system. A companion bill has been introduced in the House.

If a significant number of states opted out of the federal system, it would collapse and responsibility for roads would revert to the states. The vast majority of road users would benefit from such a change. And, if "livability" standards were deemed desirable, local preferences would determine them, rather than federal "greenhouse gas emissions reduction goals."

Mr. Roth is a research fellow at The Independent Institute and editor of "Street Smart: Competition, Entrepreneurship and the Future of Roads" (Transaction, 2006).

Tilting at Windmill Jobs: The 'stimulus' promised a jobless peak of 8%; it's now 9.5%

Tilting at Windmill Jobs. WSJ Editorial
The 'stimulus' promised a jobless peak of 8%; it's now 9.5%.
The Wall Street Journal, Jul 03, 2009, p A12

About the best we can say about yesterday's June jobs report is that employment is usually a lagging economic indicator. At least we hope it is, because the loss of 467,000 jobs for the month is one more sign that the economy still hasn't hit bottom despite months of epic fiscal and monetary reflation.

The report is in many ways even uglier than the headline numbers. Average hours worked per week dropped to 33, the lowest level in at least 40 years. This means that millions of full-time workers are being downgraded to part-time, as businesses slash labor costs to remain above water. Because people are working less, wages have fallen by 0.3% this year. Factories are operating at only 65% capacity, while the overall jobless rate hit 9.5%. Throw in discouraged workers who want full-time work, and the labor underutilization rate climbed to 16.5%.

The news is even worse for young people, with nearly one in four teenagers unemployed. Congress has scheduled an increase in the minimum wage later this month, which will price even more of these unskilled youths out of a vital start on the career ladder. One useful policy response would be for Congress to rescind the wage hike to $7.25 an hour (from $6.55) that is scheduled for July 24. But the union economic model that now dominates Washington holds that wages only matter for those who already have jobs. The jobs that are never created don't count.

The goods producing sector -- Americans who make things -- shed 223,000 more jobs last month. Asked about these job losses by the Associated Press yesterday, President Obama said Congress should pass his cap-and-tax on carbon energy because "If we're weatherizing every building and home in America, if we are creating windmills and solar panels and biofuel facilities, that is a huge promising area not only for jobs here in the United States, but also for export growth." But even under the most optimistic scenario, not every hard-hat worker in America can make windmill blades and solar panels. With manufacturing on its back, enacting a new energy tax to drive more jobs offshore is crazy even on Keynesian grounds.

Of course, the economy can't keep falling forever, and most forecasters still see a recovery starting this year. The decline in manufacturing slowed last month and housing sales have picked up -- both positive leading indicators. The plunge in inventories means industrial production and durable goods orders are bound to increase. Consumers are also spending more again, albeit with more caution than if gasoline hadn't increased by $1 a gallon in recent months and if they felt more confident about their job security.

The real question is how strong and sustained any expansion will be. If the "stimulus" were working as advertised, it ought to be very strong. Washington has thrown trillions of dollars at this recession, including that famous $787 billion in more spending that was supposed to yield $1.50 in growth for every $1 spent. This followed the $168 billion or so stimulus that George W. Bush and Nancy Pelosi promised in February 2008 would prevent a recession. The jobless rate that month was 4.8%.

Most of this government spending has gone to transfer payments -- Medicaid, jobless benefits and the like -- that do nothing for jobs or growth. The spending that might create jobs -- on roads, say -- is dribbling out with typical government efficiency. Meanwhile, the money for all of this has to come from somewhere, and Democrats are already saying it will require big (unstimulating) tax increases in 2011, and perhaps sooner.

The Administration argues that the recession would be worse without the stimulus, which is impossible to disprove. However, it's worth recalling that Mr. Obama's economists predicted late last year that the stimulus would keep the jobless rate from exceeding 8%. That was a percentage point and a half ago. It's far more likely that the economy would have been better off without the spending, and the higher taxes and debt financing that it implies.

As always, a sustained expansion and job creation must come from private investment and risk-taking. Yet as America's entrepreneurs look at Washington they see uncertainty and higher costs from a $1 trillion health-care bill; higher energy costs from the cap-and-tax bill that just passed the House (see below); new restraints on consumer lending in the financial reform bill; new tariffs and threats of trade protection; limits on compensation and banker baiting; and the possibility of easier unionization, among numerous other Congressional brainstorms.

None of this inspires "animal spirits." The best thing Mr. Obama could do to create jobs would be to declare he's dropping all of this and starting over.

Orszag nails it: The 'largest corporate welfare program' ever

The Carbonated Congress. WSJ Editorial
Orszag nails it: The 'largest corporate welfare program' ever.
The Wall Street Journal, Jul 03, 2009, p A12

President Obama is calling the climate bill that the House passed last week an "extraordinary" achievement, and so it is. The 1,200-page wonder manages the supreme feat of being both hugely expensive while doing almost nothing to reduce carbon emissions.

The Washington press corps is playing the bill's 219-212 passage as a political triumph, even though one of five Democrats voted against it. The real story is what Speaker Nancy Pelosi, House baron Henry Waxman and the President himself had to concede to secure even that eyelash margin among the House's liberal majority. Not even Tom DeLay would have imagined the extravaganza of log-rolling, vote-buying, outright corporate bribes, side deals, subsidies and policy loopholes. Every green goal, even taken on its own terms, was watered down or given up for the sake of political rents.

Begin with the supposed point of the exercise -- i.e., creating an artificial scarcity of carbon in the name of climate change. The House trimmed Mr. Obama's favored 25% reduction by 2020 to 17% in order to win over Democrats leery of imposing a huge upfront tax on their constituents; then they raised the reduction to 83% in the out-years to placate the greens. Even that 17% is not binding, since it would be largely reached with so-called offsets, through which some businesses subsidize others to make emissions reductions that probably would have happened anyway.

Even if the law works as intended, over the next decade or two real U.S. greenhouse emissions might be reduced by 2% compared to business as usual. However, consumers would still face higher prices for electric power, transportation and most goods and services as this inefficient and indirect tax flowed down the energy chain.

The sound bite is that this policy would only cost households "a postage stamp a day." But that's true only as long as the program doesn't really cut emissions. The goal here is to tell voters they'll pay nothing in order to get the cap-and-tax bureaucracy in place -- even though the whole idea is to raise prices to change American behavior. At the same time -- wink, wink -- Democrats tell the greens they can tighten the emissions vise gradually over time.

Meanwhile, Congress had to bribe every business or interest that could afford a competent lobbyist. Carbon permits are valuable, yet the House says only 28% of the allowances would be auctioned off; the rest would be given away. In March, White House budget director Peter Orszag told Congress that "If you didn't auction the permit, it would represent the largest corporate welfare program that has ever been enacted in the history of the United States."

Naturally, Democrats did exactly that. To avoid windfall profits, they then chose to control prices, asking state regulators to require utilities to use the free permits to insulate ratepayers from price increases. (This also obviates the anticarbon incentives, but never mind.) Auctions would reduce political favoritism and interference, as well as provide revenue to cut taxes to offset higher energy costs. But auctions don't buy votes.

Then there was the peace treaty signed with Agriculture Chairman Colin Peterson, which banned the EPA from studying the carbon produced by corn ethanol and transferred farm emissions to the Ag Department, which mainly exists to defend farm subsidies. Not to mention the 310-page trade amendment that was introduced at 3:09 a.m. When Congress voted on the bill later that day, the House clerk didn't even have an official copy.

The revisions were demanded by coal-dependent Rust Belt Democrats to require tariffs on goods from countries that don't also reduce their emissions. Democrats were thus admitting that the critics are right that this new energy tax would send U.S. jobs overseas. But instead of voting no, their price for voting yes is to impose another tax on imports from China and India, among others. So a Smoot-Hawley green tariff is now official Democratic policy.

Mr. Obama's lobbyists first acquiesced to this tariff change to get the bill passed. Afterwards the President said he disliked "sending any protectionist signals" amid a world recession, but he refused to say whether this protectionism was enough to veto the bill. Then in a Saturday victory lap, he talked about green jobs and a new clean energy economy, but he made no reference to cap and trade -- no doubt because he knows that energy taxes are unpopular and that the bill faces an even tougher slog in the Senate.

Mr. Obama wants something tangible to take to the U.N. climate confab in Denmark in December, but the more important issue is what this exercise says about his approach to governance. The President seems to believe that the Carter and Clinton Presidencies failed by fighting too much with Democrats in Congress. So his solution is to abdicate his agenda to Congress -- first the stimulus, now cap and trade, and soon health care. We wish he had told us he was running to be Prime Minister.

Fuel Standards Are Killing GM

Fuel Standards Are Killing GM. By Alan Reynolds
WSJ,Jul 02, 2009

The Washington Post Discovers the Problems with Energy Subsidies

The Washington Post Discovers the Problems with Energy Subsidies.
Institute for Energy Research, Jun 24, 2009


From the Washington Post editors:

"Uncertainties abound: What if the costs of clean coal don’t come down enough to make it economical relative to other measures? If clean coal turns out to be less than its advocates envision, can Congress ever work up the political will to kill the subsidy program? Subsidies are set to phase out after 10 years of paying for operating costs, but won’t powerful coal-state lawmakers fight to keep them going? And even if it does work, won’t members of Congress insist that big carbon repositories not be located in their districts?"

WSJ Editorial Page: Democrats off-loading economics to pass climate change bill

The Cap and Tax Fiction. WSJ Editorial
Democrats off-loading economics to pass climate change bill.
The Wall Street Journal, page A14

House Speaker Nancy Pelosi has put cap-and-trade legislation on a forced march through the House, and the bill may get a full vote as early as Friday. It looks as if the Democrats will have to destroy the discipline of economics to get it done.

Despite House Energy and Commerce Chairman Henry Waxman's many payoffs to Members, rural and Blue Dog Democrats remain wary of voting for a bill that will impose crushing costs on their home-district businesses and consumers. The leadership's solution to this problem is to simply claim the bill defies the laws of economics.

Their gambit got a boost this week, when the Congressional Budget Office did an analysis of what has come to be known as the Waxman-Markey bill. According to the CBO, the climate legislation would cost the average household only $175 a year by 2020. Edward Markey, Mr. Waxman's co-author, instantly set to crowing that the cost of upending the entire energy economy would be no more than a postage stamp a day for the average household. Amazing. A closer look at the CBO analysis finds that it contains so many caveats as to render it useless.

For starters, the CBO estimate is a one-year snapshot of taxes that will extend to infinity. Under a cap-and-trade system, government sets a cap on the total amount of carbon that can be emitted nationally; companies then buy or sell permits to emit CO2. The cap gets cranked down over time to reduce total carbon emissions.

To get support for his bill, Mr. Waxman was forced to water down the cap in early years to please rural Democrats, and then severely ratchet it up in later years to please liberal Democrats. The CBO's analysis looks solely at the year 2020, before most of the tough restrictions kick in. As the cap is tightened and companies are stripped of initial opportunities to "offset" their emissions, the price of permits will skyrocket beyond the CBO estimate of $28 per ton of carbon. The corporate costs of buying these expensive permits will be passed to consumers.

The biggest doozy in the CBO analysis was its extraordinary decision to look only at the day-to-day costs of operating a trading program, rather than the wider consequences energy restriction would have on the economy. The CBO acknowledges this in a footnote: "The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap."

The hit to GDP is the real threat in this bill. The whole point of cap and trade is to hike the price of electricity and gas so that Americans will use less. These higher prices will show up not just in electricity bills or at the gas station but in every manufactured good, from food to cars. Consumers will cut back on spending, which in turn will cut back on production, which results in fewer jobs created or higher unemployment. Some companies will instead move their operations overseas, with the same result.

When the Heritage Foundation did its analysis of Waxman-Markey, it broadly compared the economy with and without the carbon tax. Under this more comprehensive scenario, it found Waxman-Markey would cost the economy $161 billion in 2020, which is $1,870 for a family of four. As the bill's restrictions kick in, that number rises to $6,800 for a family of four by 2035.

Note also that the CBO analysis is an average for the country as a whole. It doesn't take into account the fact that certain regions and populations will be more severely hit than others -- manufacturing states more than service states; coal producing states more than states that rely on hydro or natural gas. Low-income Americans, who devote more of their disposable income to energy, have more to lose than high-income families.

Even as Democrats have promised that this cap-and-trade legislation won't pinch wallets, behind the scenes they've acknowledged the energy price tsunami that is coming. During the brief few days in which the bill was debated in the House Energy Committee, Republicans offered three amendments: one to suspend the program if gas hit $5 a gallon; one to suspend the program if electricity prices rose 10% over 2009; and one to suspend the program if unemployment rates hit 15%. Democrats defeated all of them.

The reality is that cost estimates for climate legislation are as unreliable as the models predicting climate change. What comes out of the computer is a function of what politicians type in. A better indicator might be what other countries are already experiencing. Britain's Taxpayer Alliance estimates the average family there is paying nearly $1,300 a year in green taxes for carbon-cutting programs in effect only a few years.

Americans should know that those Members who vote for this climate bill are voting for what is likely to be the biggest tax in American history. Even Democrats can't repeal that reality.

A warning from Copenhagen

A warning from Copenhagen. By stefan
Real Climate, Jun 21, 2009

In March the biggest climate conference of the year took place in Copenhagen: 2500 participants from 80 countries, 1400 scientific presentations. Last week, the Synthesis Report of the Copenhagen Congress was handed over to the Danish Prime Minister Rasmussen in Brussels. Denmark will host the decisive round of negotiations on the new climate protection agreement this coming December.

The climate congress was organised by a "star alliance" of research universities: Copenhagen, Yale, Berkeley, Oxford, Cambridge, Tokyo, Beijing - to name a few. The Synthesis Report is the most important update of climate science since the 2007 IPCC report.

So what does it say? Our regular readers will hardly be surprised by the key findings from physical climate science, most of which we have already discussed here. Some aspects of climate change are progressing faster than was expected a few years ago - such as rising sea levels, the increase of heat stored in the ocean and the shrinking Arctic sea ice. "The updated estimates of the future global mean sea level rise are about double the IPCC projections from 2007″, says the new report. And it points out that any warming caused will be virtually irreversible for at least a thousand years - because of the long residence time of CO2 in the atmosphere.

Perhaps more interestingly, the congress also brought together economists and social scientists researching the consequences of climate change and analysing possible solutions. Here, the report emphasizes once again that a warming beyond 2ºC is a dangerous thing:

Temperature rises above 2ºC will be difficult for contemporary societies to cope with, and are likely to cause major societal and environmental disruptions through the rest of the century and beyond.

(Incidentally, by now 124 nations have officially declared their support for the goal of limiting warming to 2ºC or less, including the EU - but unfortunately not yet the US.)

Some media representatives got confused over whether this 2ºC-guardrail can still be met. The report's answer is a clear yes - if rapid and decisive action is taken:

The conclusion from both the IPCC and later analyses is simple - immediate and dramatic emission reductions of all greenhouse gases are needed if the 2ºC guardrail is to be respected.

Cause of the confusion was apparently that the report finds that it is inevitable by now that greenhouse gas concentrations in the atmosphere will overshoot the future stabilization level that would keep us below 2ºC warming. But this overshooting of greenhouse gas concentrations need not lead temperatures to overshoot the 2ºC mark, provided it is only temporary. It is like a pot of water on the stove - assume we set it to a small flame which will make the temperature in the pot gradually rise up to 70ºC and then no further. Currently, the water is at 40ºC. When I turn up the flame for a minute and then back down, this does not mean the water temperature will exceed 70ºC, due to the inertia in the system. So it is with climate - the inertia here is in the heat capacity of the oceans.

From a natural science perspective, nothing stops us from limiting warming to 2ºC. Even from an economic and technological point of view this is entirely feasible, as the report clearly shows. The ball is squarely in the field of politics, where in December in Copenhagen the crucial decisions must be taken. The synthesis report puts it like this: Inaction is inexcusable.


Related links

Press release of PIK about the release of the synthesis report

Copenhagen Climate Congress - with webcasts of the plenary lectures (link on bottom right - my talk is in the opening session part 2, just after IPCC chairman Pachauri)

Nobel Laureate Meeting in London - a high caliber gathering in May that agreed on a remarkable memorandum which calls for immediate policy intervention: "We know what needs to be done. We can not wait until it is too late." The new U.S. Energy Secretary Steven Chu participated over the full three days in the scientific discussions - how many politicians would have done that?

On the New CCSP Report

Obama's Phil Cooney and the New CCSP Report. By Roger Pielke, Jr
Prometheus, Jun 16, 2009

Imagine if an industry-funded government contractor had a hand in writing a major federal report on climate change. And imagine if that person used his position to misrepresent the science, to cite his own non-peer reviewed work, and to ignore relevant work in the peer-reviewed literature. There would be an outrage, surely . . .

The Obama Administration has re-released a report (PDF) first issued in draft form by the Bush Administration last July (still online PDF). The substance of the report is essentially the same as last year's version, with a bit more professionalism in the delivery. For instance, the photo-shopped picture of a flood appears to be removed and the embarrassing executive summary has been replaced by something more appropriate.

This post is about how the report summarizes the issue of disasters and climate change, including several references to my work, which is misrepresented. This post is long and detailed, which is necessary to support my claims. But stick with it, or skip to the end if you've seen the details before (and long-time readers will have seen them often), there is a surprise at the end.

Here is the relevant paragraph of the CCSP report, found on p. 105:

While economic and demographic factors have no doubt contributed to observed increases in losses,346 these factors do not fully explain the upward trend in costs or numbers of events.344,347 For example, during the time period covered in the figure to the right, population increased by a factor of 1.3 while losses increased by a factor of 15 to 20 in inflation-corrected dollars. Analyses asserting little or no role of climate change in increasing the risk of losses tend to focus on a highly limited set of hazards and locations. They also often fail to account for the vagaries of natural cycles and inflation adjustments, or to normalize for countervailing factors such as improved pre- and post-event loss prevention (such as dikes, building codes, and early warning systems).348,349
Lets take it sentence by sentence.


Sentence #1

While economic and demographic factors have no doubt contributed to observed increases in losses,346 these factors do not fully explain the upward trend in costs or numbers of events.344,347Reference 346 is to a paper I co-authored:

Pielke, Jr., R. A., Gratz, J., Landsea, C. W., Collins, D., Saunders, M., and Musulin, R., 2008. Normalized Hurricane Damages in the United States: 1900-2005. Natural Hazards Review, Volume 9, Issue 1, pp. 29-42. (PDF)

In that paper we did indeed conclude that economic and demographic factors have contributed to losses related to hurricanes. In fact, we concluded that these factors accounted for all of the increase in hurricane losses over the period of record:

The lack of trend in twentieth century normalized hurricane losses is consistent with what one would expect to find given the lack of trends in hurricane frequency or intensity at landfall.

The CCSP report however, says the opposite, that these factors do not explain the upward trend in costs or numbers of events. To support this claim they provide two citations. Lets consider each in turn, first #344:

Mills, E., 2005: Insurance in a climate of change. Science, 309(5737), 1040-1044.

If you go to Mills, and I have, you will find that it is a commentary that does not offer any new research. Instead, its assertion that societal factors cannot explain the increase in disaster losses is based on a further reference; here is what Mills says:

Global weather-related losses in recent years have been trending upward much faster than population, inflation, or insurance penetration, and faster than non-weather-related events

You will see in my comprehensive discussion of Mills that he relied on two sources to support this claim. The first source actually refers to the second, so there is only one source. That one source is a 2000 Munich Re report, which for reasons I explain in the previous link does not actually support its claim.

But more problematically, why is a report characterized by Science Advisor John Holdren as being the "most up-to-date, authoritative, and comprehensive" analysis relying on a secondary, non-peer source citing another non-peer reviewed source from 2000 to support a claim that a large amount of uncited and more recent peer reviewed literature says the opposite about?

The second citation referred to is #347:

Rosenzweig, C., G. Casassa, D.J. Karoly, A. Imeson, C. Liu, A. Menzel, S. Rawlins, T.L. Root, B. Seguin, and P. Tryjanowski, 2007: Assessment of observed changes and responses in natural and managed systems. In: Climate Change 2007: Impacts, Adaptation and Vulnerability. Contribution of Working Group II to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change [Parry, M.L., O.F. Canziani, J.P. Palutikof, P.J. van der Linden, and C.E. Hanson, (eds.)]. Cambridge University Press, Cambridge, UK, and New York, pp. 79-131.

Which is of course Chapter 1 of the 2007 IPCC AR4 WGII report. That report relied on a single study to make the following claim (at p. 110):

A global catalogue of catastrophe losses was constructed(MuirWood et al., 2006), normalised to account for changes that have resulted from variations in wealth and the number and value of properties located in the path of the catastrophes . . . Once the data were normalised, a small statistically significant trend was found for an increase in annual catastrophe loss since 1970 of 2% per year.

Muir-Wood (2006) is of course the white paper prepared in advance of the Hohenkammer Workshop on disaster losses that I organized along with Peter Hoeppe (of Munich Re) in 2006. I called the IPCC out on this cherrypicking/misrepresentation when the report was first released. Even though Muir-Wood et al. (2006) found no trends from 1950, and more importantly the Hohenkammer Workshop resulted in a consensus finding that such attribution was not possible, the Muir-Wood et al. study has been cherry-picked by the IPCC and before that the Stern Review and now, indirectly, again by the CCSP.

So to summarize: sentence one is not supported by the citations provided, which lead in both cases to selectively chosen non-peer revied sources, and the citations that are peer reviewed on this subject come to an opposite conclusion and are ignored.


Sentence #2

For example, during the time period covered in the figure to the right, population increased by a factor of 1.3 while losses increased by a factor of 15 to 20 in inflation-corrected dollars.That figure appears to the right and its problems are many.

That figure appears to the right and its problems are many.

1. The figure includes a major earthquake and 9/11.
2. The figure and the text neglect the effects of increasing wealth.
3. Published peer reviewed studies show no long-term trends in flood or hurricane losses once adjusted for societal change, yet those data are included.


Sentences #3 and #4

Analyses asserting little or no role of climate change in increasing the risk of losses tend to focus on a highly limited set of hazards and locations. They also often fail to account for the vagaries of natural cycles and inflation adjustments, or to normalize for countervailing factors such as improved pre- and post-event loss prevention (such as dikes, building codes, and early warning systems).348,349

I have to think that that the third sentence is referring to at least some of my work. Places that have been looked at include the United States for floods, hurricanes, and tornadoes (I'll ignore other studies outside the US since this CCSP report is referring only to the US). So what does that leave remaining? Not much.

The fourth sentence cannot be referring to my work, since it explicitly considers variability, inflation, and mitigation. Strangely enough that sentence is supported (reference #348) by a letter to Science (PDF) that I wrote on the Mills (2005) paper. In that letter I stated:

Presently, there is simply no scientific basis for claims that the escalating cost of disasters is the result of anything other than increasing societal vulnerability.

So it is strange to see it cited suggesting something that it does not.

Finally, #349 goes to a new paper by Mills which can be found here in PDF. Mills 2009 offers nothing related to the subject of this sentence, so it is strange to see it cited as a source here.

How can we explain how such a patently bad paragraph full of misrepresentations appeared in a U.S. government report?

One answer might lie in the fact that Evan Mills was a co-author of the report (p. 159). Do you think that had anything to do with it? His list of consulting clients is positively Phil Cooney-esque. Here are a few businesses and organizations that he lists under Consulting & Advising in his resume:

* Armstrong/Energyn (US)
* Barakat, Howard & Chamberlin, Inc. (US)
* Better Energy Systems (UK)
* Ceres (US)
* CMC Energy Services (US)* Integrated Process Technologies (US)
* Investment Research, Inc. (US)
* Teton Energy Partners (US)

So a person responsible for misrepresenting science in a government report has ties and presumably financial interests with companies that have an interest in climate policy outcomes? No, couldn't be. Could it?

For those wanting a more rounded picture of extremes in the United States, here is what an earlier CCSP report concluded about extreme events in the United States, but which was uncited by this new CCSP report in this paragraph:

1. Over the long-term U.S. hurricane landfalls have been declining.
2. Nationwide there have been no long-term increases in drought.
3. Despite increases in some measures of precipitation (pp. 46-50, pp. 130-131), there have not been corresponding increases in peak streamflows (high flows above 90th percentile).
4. There have been no observed changes in the occurrence of tornadoes or thunderstorms
5. There have been no long-term increases in strong East Coast winter storms (ECWS), called Nor’easters.
6. There are no long-term trends in either heat waves or cold spells, though there are trends within shorter time periods in the overall record.

When ‘Green’ Travel isn’t ‘Green’ - Thesis by Mikhail Chester

When ‘Green’ Travel isn’t ‘Green’. By Greg Pollowitz
Planet Gore/NRO, Monday, June 08, 2009

Here's a great article via Breitbart on the difficulty of determining what the "greenest" form of travel actually is. Worth reading in its entirety, but here's an excerpt:

So you always prefer to take the train or the bus rather than a plane, and avoid using a car whenever you can, faithful to the belief that this inflicts less harm to the planet.

Well, there could be a nasty surprise in store for you, for taking public transport may not be as green as you automatically think, says a new US study.

Its authors point out an array of factors that are often unknown to the public.

These are hidden or displaced emissions that ramp up the simple "tailpipe" tally, which is based on how much carbon is spewed out by the fossil fuels used to make a trip.

Environmental engineers Mikhail Chester and Arpad Horvath at the University of California at Davis say that when these costs are included, a more complex and challenging picture emerges.

In some circumstances, for instance, it could be more eco-friendly to drive into a city — even in an SUV, the bete noire of green groups — rather than take a suburban train. It depends on seat occupancy and the underlying carbon cost of the mode of transport.

"We are encouraging people to look at not the average ranking of modes, because there is a different basket of configurations that determine the outcome," Chester told AFP in a phone interview.

"There's no overall solution that's the same all the time."

Political and economic contradictions of the 'new GM'

Car Quandary. WaPo Editorial
Political and economic contradictions of the 'new GM'
WaPo, Tuesday, June 9, 2009

POOR BOB LUTZ. The vice chairman of General Motors loves "muscle cars" like the Camaro. He knows that, unless fuel prices go much higher and stay there, the American market for big cars is likely to exceed the market for small cars. Yet he has to build a little four-seat plug-in electric hybrid called the Chevrolet Volt, roll it out next year and try to sell it for $40,000 (not counting a likely $7,500 federal tax rebate). It doesn't make much sense economically, and the few thousand Volts that GM plans to produce at first won't dent U.S. carbon emissions much either. But, as Mr. Lutz told The Post's Michael Leahy, he feels pressure from Washington to do something spectacular on the electric car front. The Volt, he says, "is an important symbol. We need it. It has a chance to change our image."

When GM was still a privately owned company, this latest episode of Detroit agonistes would be no one's problem but GM's and its stockholders'. But soon, if they become owners of 60 percent of the company, taxpayers could be on the hook for the Volt. And Mr. Lutz's quandary epitomizes the political and economic contradictions of the "new GM." The taxpayers' interest is to get GM out of the red and back in private hands as soon as possible, consistent with environmental and fuel-efficiency standards. By that logic, the automaker's only goal would be to make what people want to buy; expensive "image" projects such as the Volt would wait. Yet the political pressures that drove GM to build the Volt in the first place -- namely, Congress's demand for a U.S.-made answer to the Toyota Prius -- are stronger than ever now that the government is about to own the company. So GM will build the Volt, even if it loses money, taxpayer money.

And members of Congress will delve into other aspects of the car companies' business. Rep. Barney Frank (D-Mass.), chairman of the House Banking Committee, has already prevailed on GM to extend the life of a plant in his district. GM and Chrysler dealers, thousands of whom are set to close in order to streamline the companies' sales efforts, have flocked to Capitol Hill demanding relief. In response, House members of both parties have introduced a bill that would block the closure of GM and Chrysler dealerships. If this proposal ever makes it to his desk, President Obama should veto it. America can have nationalized auto companies with a chance, however slim, of someday turning a profit. Or it can have nationalized firms subject to constant political tinkering. It can't have both.

Brookings: Consequences of Cap and Trade

Consequences of Cap and Trade. By Warwick McKibbin, Adele Morris, Peter Wilcoxen, and Yiyong Cai
Brookings, Jun 08, 2009

SUMMARY

The U.S. Congress continues to debate a potential cap-and-trade program for the control of greenhouse gas (GHG) emissions. The economic effects of such a bill remain in dispute, with some arguing that a cap-and-trade program would create jobs and improve economic growth and others arguing that the program would shift jobs overseas and hit households with large energy price increases.

This report applies a global economic model to evaluate different emission reduction paths and to offer insights to policymakers about how to the design the program to lower the costs of achieving long-run environmental goals. The study examines emissions reduction paths that are broadly consistent with proposals by President Obama, Representatives Waxman and Markey, along with two cost minimizing paths that reach similar goals.

KEY FINDINGS

The study estimates that alternative paths to reach an emission reduction target of 83% below 2005 levels by 2050:

• reduce cumulative U.S. emissions by 38% to 49%, about 110 to 140 billion metric tons CO2
• reduce total personal consumption by 0.3% to 0.5%, or about $1 to $2 trillion in discounted present value from 2010 to 2050
• reduce the level of U.S. GDP by around 2.5% relative to what it otherwise would have been in 2050
• reduce employment levels by 0.5% in the first decade, with large differences across sectors
• create an annual value of emission allowances peaking at around $300 billion by 2030, and a total value of about $9 trillion from 2012 to 2050

The different timing of emissions reductions under the various paths explored has significant effects:
• Without banking, in the short run the Obama and Waxman-Markey emission paths result in more gradual carbon price rises than the paths that minimize the present value of abatement costs. In the medium run, Obama and Waxman-Markey targets are relatively more stringent.

Incremental stringency produces high incremental cost, e.g. an extra 8% reduction increases costs by 45%.

LEARN MORE

For more information about the Climate and Energy Economic Project, please visithttp://www.brookings.edu/topics/climate-and-energy-economics.aspx

Hurricane Damage and Global Warming

Hurricane Damage and Global Warming. By Daniel Sutter
How Bad Could It Get and What Can We Do about It Today?
CEI, June 3, 2009

Full study available in pdf

Climate experts and policy makers have debated the existence of a potential link between global warming and increased hurricane activity since the record-setting 2005 Atlantic hurricane season. While claims that hurricanes are already stronger due to climate change are highly controversial, research demonstrates that increases in societal vulnerability to hurricanes—the number of persons and amount of property in coastal areas—goes a long way toward explaining the increases in hurricane losses over time.

This paper focuses on hurricane damage projections, reviews them in detail, and critiques the projections. It details how existing public policies have helped increase hurricane losses. In its final section, the paper recommends specific policies to reduce populations’ vulnerability to hurricanes.

Existing public policies—including insurance regulation, government-subsidized flood insurance, improper mitigation, and faulty building code enforcement—contribute to unnecessarily risky and inefficient development along coastal areas by shifting the cost of hurricane damage ultimately onto third parties—mainly taxpayers. Poor policies lead to excessive vulnerability to hurricanes and would exacerbate the cost of any increase in storm activity, whether due to climate change or any other factor. Insurance subsidies and mitigation may not be normally considered part of the climate change debate, but within that debate reform of these policies now will constitute a “no regrets” strategy. In other words, reforms will yield benefits in all circumstances—especially if adverse climate change does occur.

Cap-and-Trade: All Cost, No Benefit

Cap-and-Trade: All Cost, No Benefit. By Martin Feldstein
WaPo, Monday, June 1, 2009

The Obama administration and congressional Democrats have proposed a major cap-and-trade system aimed at reducing carbon dioxide emissions. Scientists agree that CO2 emissions around the world could lead to rising temperatures with serious long-term environmental consequences. But that is not a reason to enact a U.S. cap-and-trade system until there is a global agreement on CO2 reduction. The proposed legislation would have a trivially small effect on global warming while imposing substantial costs on all American households. And to get political support in key states, the legislation would abandon the auctioning of permits in favor of giving permits to selected corporations.

The leading legislative proposal, the Waxman-Markey bill that was recently passed out of the House Energy and Commerce Committee, would reduce allowable CO2 emissions to 83 percent of the 2005 level by 2020, then gradually decrease the amount further. Under the cap-and-trade system, the federal government would limit the total volume of CO2 that U.S. companies can emit each year and would issue permits that companies would be required to have for each ton of CO2 emitted. Once issued, these permits would be tradable and could be bought and sold, establishing a market price reflecting the targeted CO2 reduction, with a tougher CO2 standard and fewer available permits leading to higher prices.

Companies would buy permits from each other as long as it is cheaper to do that than to make the technological changes needed to eliminate an equivalent amount of CO2 emissions. Companies would also pass along the cost of the permits in their prices, pushing up the relative price of CO2-intensive goods and services such as gasoline, electricity and a range of industrial products. Consumers would respond by cutting back on consumption of CO2-intensive products in favor of other goods and services. This pass-through of the permit cost in higher consumer prices is the primary way the cap-and-trade system would reduce the production of CO2 in the United States.

The Congressional Budget Office recently estimated that the resulting increases in consumer prices needed to achieve a 15 percent CO2 reduction -- slightly less than the Waxman-Markey target -- would raise the cost of living of a typical household by $1,600 a year. Some expert studies estimate that the cost to households could be substantially higher. The future cost to the typical household would rise significantly as the government reduces the total allowable amount of CO2.

Americans should ask themselves whether this annual tax of $1,600-plus per family is justified by the very small resulting decline in global CO2. Since the U.S. share of global CO2 production is now less than 25 percent (and is projected to decline as China and other developing nations grow), a 15 percent fall in U.S. CO2 output would lower global CO2 output by less than 4 percent. Its impact on global warming would be virtually unnoticeable. The U.S. should wait until there is a global agreement on CO2 that includes China and India before committing to costly reductions in the United States.

The CBO estimates that the sale of the permits for a 15 percent CO2 reduction would raise revenue of about $80 billion a year over the next decade. It is remarkable, then, that the Waxman-Markey bill would give away some 85 percent of the permits over the next 20 years to various businesses instead of selling them at auction. The price of the permits and the burden to households would be the same whether the permits are sold or given away. But by giving them away the government would not collect the revenue that could, at least in principle, be used to offset some of the higher cost to households.

The Waxman-Markey bill would give away 30 percent of the permits to local electricity distribution companies with the expectation that their regulators would require those firms to pass the benefit on to their customers. If they do this by not raising prices, there would be less CO2 reduction through lower electricity consumption. The permit price would then have to be higher to achieve more CO2 reduction on all other products. Some electricity consumers would benefit, but the cost to all other American families would be higher.

In my judgment, the proposed cap-and-trade system would be a costly policy that would penalize Americans with little effect on global warming. The proposal to give away most of the permits only makes a bad idea worse. Taxpayers and legislators should keep these things in mind before enacting any cap-and-trade system.

Martin Feldstein, a professor of economics at Harvard University and president emeritus of the nonprofit National Bureau of Economic Research, was chairman of the Council of Economic Advisers from 1982 to 1984.