Monday, December 21, 2009

Copenhagen Update: What's Next?

What can we expect to happen next after the breakdown in Copenhagen? Considering that no deadline was put in place to reach an international accord, it seems safe to say that such an agreement is easily several years away, particularly in light of the great differences that exist on the major issues, like binding emission reductions.

The outcome in Copenhagen is also going to make it very hard for Senate Democrats, particularly those from Midwestern manufacturing states, to vote for anything that resembles the House bill. Considering China had little interest in even talking to our President in Copenhagen, those senators should be wary of voting for any bill that will send jobs in their states overseas. That is exactly what cap and trade will do.

Just as the Kyoto Accord should be torn up and a whole new approach developed, the same can be said of climate legislation before Congress. While we have been busy debating climate bills, China and India’s economies have continued to grow. China has spent the last year buying up energy and mineral resources around the world, including the Canadian oil sands. Meanwhile, we engage in a completely pointless either/or debate about energy. If we don’t wake up, we will find our energy security severely compromised in the not-to-distant future.

We need to refocus the U.S. debate so that it is about energy security and independence and how best to drive the technology needed to achieve both. The discussion needs to recognize the need for more nuclear power, the important role fossil fuels will continue to play, the need for economically sustainable renewable energy, and how to best drive energy efficiency. Greenhouse gas emission reductions will be a byproduct of this effort.

We will need all of these approaches to meet our future energy needs and increase our energy security. We cannot continue to delude ourselves into thinking one or two technologies alone will make the difference. The time to change the conversation is now, before it is too late.

Saturday, December 19, 2009

Copenhagen Update: Broken Process

The U.N. Climate Change Conference in Copenhagen ended early this morning with delegates voting to “take note” of an agreement brokered by the U.S. that essentially establishes a system for third party verification of emissions and aid to developing countries. The final agreement did not establish binding emission reduction targets or even set a timeline for their completion. The vote to simply “take note of” – as opposed to approving – the agreement severely undercuts efforts by the Obama Administration to spin the agreement yesterday as unprecedented.

The Administration and other governments would be far better off being honest and admitting that the U.N. process is a failure that no amount of future talks can salvage. As noted in previous posts, the impasse is largely attributed to differences between developed and developing countries and the expectations for each under a new treaty. My main take away from this conference is that the U.N. process has simply become a forum for developing nations to extort money from developed nations under the guise of environmental protection and for traders who want to make millions of dollars in a new carbon market.

The President once again wasted an enormous amount of political capital for very little result. This agreement could have been hammered out by the Secretary of State and other foreign ministers while leaving the heads of state at home. Much of the stalemate came down to differences between the U.S. and China on issues like binding reductions, emissions verification and money. As this quote from the New York Times illustrates, the President is far more interested in a deal than the Chinese Premier: “Twice during the day, [Chinese Premier] Wen sent an underling to represent him at the meetings with Mr. Obama. To make things worse, each time it was a lower-level official.” The President needs to become a better negotiator with China on a whole range of issues.

The U.S. did float some interesting ideas over the two weeks to make China, India and other rapidly developing countries more accountable. One idea is to establish a new category of countries that captures this group and would not exempt them from making required reductions. This is crucial now that China is the largest emitter of greenhouse gas emissions. Another is to demand third party verification, which was part of the final agreement though questions remain as to whether it will have enough teeth to be effective.

The President interrupted a meeting of the leaders from China, India, Brazil and South Africa to finally get his audience with Mr. Wen. While it is embarrassing they started without him, this meeting may offer a path to a future agreement and exerting leadership. Ever since the Kyoto Protocol established different expectations for developed and developing countries, true progress on global greenhouse gas emissions reductions has been difficult. As I have said, Kyoto is broken and using its framework to craft a successor agreement will be a failure, as these talks have illustrated. It may make more sense for the leaders of the top ten emitting countries, which account for approximately 70 percent of global emissions, to work out an agreement.

A new direction is required for any international treaty to be effective. A new agreement has to recognize the changes that have taken place since 1997. With the United Nations predicting that two-thirds of the expected growth in emissions between now and 2030 will come from developing countries, exempting these countries from mandatory reductions makes no sense. And any agreement should be about the environment and not redistributing money to other countries and Wall Street.

Friday, December 18, 2009

Copenhagen update: no entry

The site of the Copenhagen climate negotiations – a conference center called Bella Center – is situated between busy roads and rail tracks south of town and is surprisingly isolated from the heart of the city.

Like the short leash they have given protesters here, security is paramount at the Bella Center. Your only chance to get within 1,000 yards of the facility is to hold a UN-issued badge. But sometimes that isn’t even good enough.

Would you believe that people who went through the rigors of getting entrance badges, traveling thousands of miles, and spending a fortune to attend have been turned away at the gates? As it turns out, thousands of badge-holders have been denied access to the climate change summit this past week, because over 40,000 badges were issued for a facility that holds only 15,000 people.

I personally know of visitors who spent hours in line never to be admitted to the Bella Center. Call me crazy, but I’m wondering how an organization that can’t even count heads for a conference is going to be able to orchestrate a complex international agreement involving nearly 200 countries?

Thursday, December 17, 2009

Copenhagen update: It's about the money

Yesterday the International Herald Tribune reported that the African Union, fearing that they may be forced to return to Africa with no cash in their pockets, has returned to talks at Copenhagen with a new proposal: "Reflecting the gulf between north and south over money, the Ethiopian prime minister, Meles Zenawi, speaking on behalf of the African Union, offered to reduce to $100 billion a proposal for wealthy countries to provide energy and adaptation aid of $400 billion a year starting in 2020," the paper reported.

It is clear that the main objective of the African Union is to get payed. What's more, they feel they are entitled. Thanks to overblown reports of man's role in climate change, the feeling across Africa (and other developing areas) is that their environmental woes are being caused by "the north."

This is another unfortunate example of how these Copenhagen talks are about economics, not the environment. Perhaps the African Union should try listening to the wisdom held in the words of "The Gambler": "You never count your money, while you're sittin' at the table, there'll be time enough for countin' when the dealin's done."

Photos from Copenhagen

Denmark gets 20 percent of its power from wind, but it also still relies on traditional energy sources including coal.

Hopenhagen (billboard) is a grassroots movement urging world leaders at the U.N. Climate Change Conference to achieve meaningful outcomes that limit future carbon emissions, minimize the effects of climate change, and fuel a sustainable global economy. As the conference winds down, hopes are fading that an agreement can be reached.

This large white ball, located in City Square in Copenhagen, Denmark, lights up at night and has climate change information scrolling around it. This area is the center of activity in Copenhagen, where various energy and environmental displays have been featured during the U.N. Climate Change Conference.

Wednesday, December 16, 2009

Copenhagen update: the religion of climate change

One of the most striking things I saw on my first walk around Copenhagen should have been no surprise at all. It was a sign, about 20 x 20 (feet not meters!) that said "Stop Climate Change Now." It was just another of the many signs plastering the walls, hanging from buildings, and displayed on cars and sea faring vessels around Copenhagen. But after some of the recent research I have been doing, this one was particularly of interest. Because the climate is, and forever has been, changing, we cannot stop this change. You might as well display a sign saying "Stop the Earth Rotating on its Axis Now."

As more and more research is released about the dramatic and sometimes sudden changes the Earth's climate has experienced long before the Industrial Age, it has become clear that many of those who have gathered here have their climate belief system and they are unwilling to accept any challenges to it, and are not very interested in the realities of historical climatology. The blinders they have put on allow them to continue to pursue their goals with a religious fervor.

The choice of Denmark as the location of these historic talks is of interest as well. Denmark was home to many of the Vikings that built wealth in the Middle Ages through pillage, conquest, and the settling of new lands that became available because of a distinct and sudden warming pattern called the Medieval Warming Period. And yet Denmark is also home to multinational corporations and banks that have spent billions preparing to make billions more from the establishment of a cap and trade regime.

Denmark stands to lose if this new climate movement loses steam. The windmills that dot the skyline here are a testament not only to the dedication to the cause, but also the vast investment.

Windmills are good and we should invest in more and ensure they are part of our energy mix and energy solution. But we also need to look at affordable technology that is available and affordable now. The U.S. needs to get religion about energy security and reliability. Let's start looking realistically at the problem and we can take realistic action.

Tuesday, December 15, 2009

Copenhagen conference update

The U.N. Climate Change Conference in Copenhagen continues to be defined by the disagreements between developed and developing countries as the talks wind toward Friday’s conclusion. Not much progress has been made. Yesterday was marked by a day of protest by African countries, whose representatives walked out of the conference over draft language being discussed regarding the expectations and responsibilities of developed and developing countries when it comes to greenhouse gas emission reductions.

This display by developing countries gets to the heart of the major obstacle facing the climate negotiators, which is what exactly the role and responsibility is of developing and developed countries if a truly effective international agreement to reduce global greenhouse emissions is to be reached. Developing countries argue that historically the majority of emissions have come from developed countries as they industrialized their economies. Therefore, developed countries bear responsibility to more aggressively reduce their emissions. Further, there is an expectation that developed countries must financially assist developing countries in transitioning to low-carbon technology and mitigating the impacts of climate change.

Developed countries worry that since developing countries are expected to account for more than two-thirds of the emissions growth over the next 30 years, they must agree to binding reductions. The rift between the U.S. and China highlights this divide. The U.S. is demanding real reductions by China and third-party verification of its reductions. China is resisting both demands, as well as efforts to create a new status for emerging economies like those in India and China that would be separate from developing countries, opening the door to requiring mandatory reductions from them.

It is unlikely that these issues will be resolved when the negotiations conclude at the end of the week. The role of developed and developing countries is sure to dominate the legislative debate in the U.S. when Congress takes up climate change legislation again after the New Year.

Sunday, December 13, 2009

Biodiesel mandate – at what cost?

The season’s first weather chill draws attention to another of Minnesota’s nation-leading energy mandates – and its resulting “cost.” We are the only state to require B5 – that all diesel fuel sold within our borders contains 5-percent biodiesel. By 2015, the mandate increases to B20. This fuel is made from renewable resources blended with petroleum diesel. In Minnesota, biodiesel is made primarily from soybean oil.

Other states have the biodiesel requirement, but Minnesota’s is easily the most aggressive. We are also the only cold-weather state to mandate B5, and that’s significant. Biodiesel often gels up during cold weather, thus hampering the performance of all diesel-fuel engines. The problem has flared up in recent winters with some school bus fleets.

Minnesota’s commissioner of commerce does have the ability to suspend the mandate when required by weather or supply issues. Still, the mandate forces diesel users in Minnesota to spend more money on fuel than states such as Wisconsin and Iowa without the mandate. The Minnesota Chamber of Commerce supports the development of renewable fuels, but mandates must be in tune with “real world” economics.

Wednesday, December 9, 2009

Live from Copenhagen

Next week, I will be in Copenhagen for the United Nations Climate Change Conference. I will post updates from the second week of the conference where delegates from over 190 countries are negotiating a successor agreement to the Kyoto Protocol. Check in to find out the latest developments from the negotiations, as well as activities happening outside of the conference.

In the run-up to Copenhagen, expectations have been lowered. Major players have acknowledged that it is very unlikely that a binding treaty can be agreed upon by the end of the conference. Instead, political commitments for reduction targets are expected, as well as efforts to agree on a level of funding that will be provided by developed countries to help developing countries address climate change. The head of the U.N. Climate Conference said last week that he hopes a binding agreement could be reached by June. Even that timeline may prove to be too ambitious.

The roadblock on the way to Copenhagen is the same one that has existed since the Kyoto Treaty: establishing different commitments for developed and developing countries. In the last two weeks, the Obama Administration pledged to reduce emissions by 17 percent by 2020, which is the target established in legislation passed by the House of Representatives last June. That announcement was followed up by a pledge from China to reduce its carbon intensity by 40 to 45 percent by 2020 and India which said it would reduce its carbon intensity by 20 to 25 percent by the same year. All three countries would use 2005 emissions as the baseline year.

By reducing carbon intensity, China and India will become more energy efficient (something that is happening already), but their overall emissions will still grow. With the U.S. pledging an absolute reduction, the risk of “carbon leakage”, or the migration of emissions from developed to developing countries, is still very real. The result: lost jobs in countries like the U.S. and increased global greenhouse gas emissions.

While Copenhagen may not produce a binding treaty as many had expected only a few months ago, there will undoubtedly be many interesting developments. Check back next week to find out what is happening in Copenhagen.

Monday, November 23, 2009

Cap-and-trade demands international solution

Any cap-and-trade policy must keep Minnesota businesses on a level playing field with their competitors in the national and global marketplaces. That’s why the Minnesota Chamber advocates a national program – but only if it is crafted within the context of an international agreement. That critical element is missing from the current debate in Congress. The proposed legislation is certain to result in higher energy prices that will be passed to ratepayers. Minnesota’s mining and forest products industries will particularly be hit hard. Overall, any product manufacturer with global sales will be less competitive if energy prices increase significantly.

This negative impact will be made worse by the proposed allocation of emission allowances for electric utilities, which penalizes utilities that are more coal dependent. Customers in Minnesota and the Midwest rely heavily on coal-powered electricity generation. As a result, they will be affected disproportionately compared with other regions, creating another competitive disadvantage for businesses.

The business community has a strong record of advancing initiatives that benefit the environment and the economy. But the federal legislation as currently framed – especially without an accompanying international agreement – won’t solve the problem, be efficient or cost effective.

The Senate Wants to Create Jobs: They Should Call Enbridge Pipeline for Advice

Sen. Jeff Bingaman (D-N.M.) wants to make sure that the upcoming "jobs bill" includes the energy sector. Creating jobs is the new political mantra. Most of us are for that since it actually helps people on Main Street rather than Wall Street. However, the private market money sources, lenders and venture capitalists are unlikely to take risks in the alternative energy sector right now. Smart money will stay close to traditional energy so long as we have a weak dollar. Just look at the performance of oil in the past several months for proof.

While oil itself has performed well, the real story in traditional energy is infrastructure. Enbridge Pipeline presents a great example of private sector job creation. Don't believe me, call the Bemidji/Grand Rapids and all in between Chambers of Commerce or read the MPR story below. These are not more government jobs, these are private sector welders, pipefitters, and hardware jobs. With the construction of the Alberta Clipper pipeline from Calgary to Superior, Wisconsin, reliable, friendly Canadian crude is brought to the upper Midwest energy consumer -- you and me. This crude is then refined at the Flint Hills Resources Refinery, just south of the Twin Cities and used by Minnesota outdoorsman in their snowmobiles, four wheelers, snowblowers, ice drills, chain saws, and cars and trucks as well as running Minnesota Main Street business. Minnesota receives approximately 80% of its oil from our Canadian neighbors.

As a result of the pipeline construction, there are no motel rooms available in Bemidji and the surrounding area, restaurants are packed, and food suppliers are running full time as are many ancillary businesses.

Want the real story about how private business is creating jobs and income and taxes right here in Minnesota. Read the details from Minnesota Public Radio at:

Wednesday, October 28, 2009

Let's Trust Science to Fix Climate Change

Ask anyone who knows me and they will tell you that I am, generally, a skeptic/pessimist. Generally, I follow clear thinking, factual analyses of complex issues rather than the media talking heads and the fringe groups making the most noise on the marginal right and left.

So, imagine my surprise and excitement when I read Freeman Dyson's uplifting, optimistic view of climate change some years ago. I was reminded of this optimism last evening when I read "BRAVE THINKERS: A Retrospective," an article in the November issue of THE ATLANTIC MONTHLY.

Here is what was said verbatim:

Name: Freeman Dyson

Job: Professor Emeritus, Institute for Advanced Study, Princeton
Why he’s brave: He’s taking a contrarian view on the Kyoto Protocol.
Quote: “I like to express heretical opinions. They might even happen to be true.”

Dyson, a renowned physicist and pioneer in quantum electrodynamics theory, has lately committed a heresy without equal in modern science: questioning climate change orthodoxy. Dyson doesn’t deny that excess carbon dioxide in the atmosphere is warming the planet. But he predicts that advances in bio-technology—especially the creation of genetically-engineered carbon-eating plants, which he foresees within two decades—will mitigate the damage with a minimum of economic and social disruption. In the meantime, he argues that large-scale carbon-restricting approaches like the Kyoto Protocol are ineffective and disproportionately hurt developing countries like China and India, where the potential to lift millions of people out of poverty now hinges on access to carbon-spewing industries. Such arguments have won him few friends; he describes the interaction between the majority of scientists holding conventional climate change views and the skeptical minority as a “dialogue of the deaf.” But in Dyson’s case, at least those arguments have evolved from a lifetime of scientific rigor and intellectual honesty.

So, Freeman Dyson, world-renowned physicist and rigorous intellectual contrarian, argues optimistically that carbon-eating plants will come to our rescue in the same way that oil-eating microbes have assisted us in cleaning up oil transport accidents, in the same way that science has assisted farmers in being more productive and less environmentally damaging. Of particular importance, it seems to me, is Dyson's concern that human-created scientific discovery and advancement will solve our greenhouse gas problems in the same way that Jonas Salk defeated polio. This optimistic, American can-do attitude brings with it the promise of enormous environmental benefit with a "minimum of social and economic impact."

Who do you trust more to solve our world's problems? Politicians and bureaucrats, or esteemed scientists like Freeman Dyson and the rigors of scientific inquiry?

Being a common sense person, like most people, I cast my vote for Freeman Dyson and science.

Wednesday, September 30, 2009

'Competitive edge’ big concern in climate change debate

President Obama delivered a clear message before the United Nations on climate change. But there’s a lot more ground to cover, and numerous specifics to flesh out. The Minnesota Chamber’s biggest concern is the impact of any legislation on the cost of energy. Minnesota historically has had competitive prices that in turn give our companies a competitive edge in the global marketplace. Whether we maintain that edge remains to be seen with any national or international agreement.

To be clear, Minnesota businesses are strong protectors of the environment. We’ve been major players in shaping state legislation to reduce smokestack emissions and increase the use of renewable energy resources. In the larger arena, from the standpoint of Minnesota businesses, we’ll lobby to make certain any cure is not costlier than the disease. To put the issue in perspective, emissions from Minnesota contribute only 0.37 percent of greenhouse gases worldwide, according to 2006 statistics. China and the United States each contribute about 20 percent. Minnesota businesses are first in line to advocate for policies that protect the environment and ensure a vital economy. But it’s shortsighted to adopt policies that threaten the livelihood of Minnesota employers and employees and do little or nothing to address climate change on the global scene.

Climate change most appropriately is addressed on the national and international levels. Even then, businesses must know the rules and the impact on their bottom lines. Minnesota’s laws on mercury reduction and renewables have been driving energy costs up in recent years. We need to play close attention to these rising costs if we are to maintain a healthy state economy.

Tuesday, September 29, 2009

LCFS: Part 1: Status Update Part 2: Analysis



According to the Congressional Research Service, the Low-Carbon Fuel Standard Act of 2009, introduced 3/30/2009, proposes the following:

  • Amends the Clean Air Act to require the Administrator of the Environmental Protection Agency (EPA) to issue regulations that:

(1) determine the lifecycle greenhouse gas emissions of all transportation fuels;

(2) determine the fuel emission baseline (i.e., average lifecycle greenhouse gas emissions per unit of energy of all transportation fuels sold in the United States in 2005);

(3) apply to refineries, blenders, and importers of transportation fuels;

(4) ensure that, for 2014-2022, annual average lifecycle greenhouse gas emissions do not exceed the fuel emission baseline; and

(5) ensure that, for 2023 and thereafter, transportation fuel providers make specified reductions in the annual average lifecycle greenhouse gas emissions for transportation fuels sold in the United States.

  • Grants the Administrator authority to waive emission reduction requirements of this Act to prevent economic or environmental harm.
  • Requires the Administrator to study the environmental and resource conservation impacts of the regulations required by this Act and their effect on energy security.


On April 23, 2009, the California Air Resources Board (ARB/Board) approved the low-carbon fuel standard (LCFS) regulation. As part of the Board hearing, the Board approved Resolution 09-31 (Resolution). The Resolution includes a number of provisions related to ongoing work on the LCFS. One such provision relates to land use and indirect effect analysis of transportation fuels.

· The Board-approved Resolution reads: “BE IT FURTHER RESOLVED that the Board directs the Executive Officer to convene an expert workgroup to assist the Board in refining and improving the land use and indirect effect analysis of transportation fuels and return to the Board no later than January 1, 2011, with regulatory amendments or recommendations, if appropriate, on approaches to address issues identified."

· While California has adopted a low-carbon fuel standard, a number of Northeastern states are also looking at the idea, as is the Midwest. Several other states, including Minnesota and Wisconsin, are considering adopting a low-carbon fuel standard.


· According to the hardly conservative New York Times, Green, Inc., "A low-carbon fuel standard is likely to do little to reduce global warming emissions and can even be counterproductive." This conclusion was based upon an academic paper entitled Greenhouse gas reductions under low-carbon fuel standards by Stephen Holland, Jonathan Hughes, and Christopher Knittel published in the highly-esteemed American Economic Journal: Economic Policy, 2009. The study found that the policy reduces consumption of high-carbon fuels like oil, but “increases low-carbon fuel production, possibly increasing net carbon emissions.”

· While a low-carbon fuel standard requires that the mix of transportation fuels sold to automobiles or trucks include only a limited percentage of carbon-intensive fuels, the idea is to cut carbon emissions from driving, since transportation accounts for more than a quarter of the country’s greenhouse gas emissions.

· The Holland, Hughes, Knittel Economic Journal article starkly concludes that a low-carbon fuel standard “cannot be efficient.”

· One problem with a low-carbon fuel standard is that it could be extremely costly. The research says that a 10 percent reduction in the carbon intensity of fuels could result in abatement costs ranging from $307 to $2,272 for each ton of carbon dioxide.

  • That is roughly 100 to 700 times the price of carbon dioxide emissions allowances now traded in the Regional Greenhouse Gas Initiative, a program in 10 Northeastern states to combat global warming by cutting power plant emissions.

· A related problem is that rather than cutting fuel use across the board, such a fuel standard would encourage drivers to increase their consumption of “low-carbon fuels,” and thus theoretically increase the overall amount of fuel consumed.

· Stephen Holland, an assistant professor in the Department of Economics at the University of North Carolina at Greensboro and one of the study’s authors, cited an analogy of a child who eats two chocolate bars but no bananas, and is told he has to increase his banana consumption. The result is that he eats two bananas and two chocolate bars, which increases his overall calories.

· Similarly, the low-carbon fuel standard is “regulating the mix, but not the levels,” he said.

· The easiest way to cut carbon emissions from transportation is to cut the level and “not drive so much,” Mr. Holland said. “Carpool! Take public transportation! Leave the car at home.”

As has been publicly argued about for the past several years, the largest controversy surrounding low-carbon fuel standards involves ethanol, and in particular how to compute the carbon cost of corn ethanol (the issue at hand in California).

· Mr. Holland, who said that ethanol was the primary fuel involved in the study, said that he used a range of assumptions about ethanol, but that since the study had gone to press, he had taken the view that corn ethanol was more carbon-intensive than the paper had accounted for.

· Finally, a low-carbon fuel standard would disallow the importing of Canadian crude from Alberta, making Minnesota and much of the upper Midwest more dependent on crude from political enemies in the Middle East. With all the economic worries our globalized economy confronts each day, deriving oil from our friendly neighbor to the north seems both prudent and reliable.

Tuesday, September 1, 2009

Business Organizes Fight Opposing Waxman Markey

"Those who do not stand up for their own rights will certainly lose them" (
Despite being a summer dominated by heated public involvement and media coverage of the national health care debate, and relatively cool temperatures for the Upper Midwest, the National Association of Manufacturers (NAM) and the National Association of Independent Businesses (NAIB) have been planning and now have launched a multi-state campaign designed to influence Senate debate of Waxman Markey.

Together with state manufacturing associations in Michigan, Indiana, Missouri, Nebraska, North Dakota, Ohio, and Virginia, this powerful business coalition is encouraging small business owners and the public to make sure their collective voices are heard on the devastating economic impact of Waxman Markey on the national economy.

The national advertisement portion of the "Speak Out" campaign will run through September 4 and will include television, radio and the Internet.

Their early August-announced Study of the Economic Impacts of Waxman Markey conducted by NAM and the American Council of Capital Formation (ACCF) produced the following five key findings:

1. cumulative loss in GDP up to $3.1 trillion (2012-2030);
2. employment losses up to 2.4 million jobs in 2030;
3. residential electricity price increases up to 50% by 2030;
4. per gallon gasoline price increases up to 26% by 2030; AND
5. the manufacturing sector would absorb 55-66% of the jobs lost

NAM and NAIB are urging the public to lobby their Senators to oppose any climate legislation that damages job creation or raises consumer and business costs.

Considering the unemployment rate increases and stagnating incomes during the great recession that began in 2006, sounds like good advice to me.

Friday, August 21, 2009

Secretary of State Clinton's State Department Signs Off on Pipeline in Minnesota

On August 20, Secretary of State Hillary Clinton’s State Department took a major step to ensure Minnesota and the Upper Midwest’s energy security by approving the construction of the Alberta Clipper pipeline from Alberta, Canada, through Minnesota to Superior, Wisconsin.

Indicating that there “is no indication” that the pipeline will worsen the impacts of climate change, the State Department has now removed the final barrier for the continued construction of the 1,000-mile Alberta Clipper pipeline.

Despite a predictable negative reaction from reactionary elements in the environmental community and assurances by President Obama that new technologies for processing the oil sands are on the way, the anti-gasoline lobby threatened lawsuits.

It is interesting to note that a real crack seems to be developing between President Obama’s administration and many environmental groups. The President, Secretary of State Hillary Clinton, and her State Department seem to have decided that energy security and good-paying, ready-to-go pipeline jobs matter in the environmental equation. Good for them.

A State Department analysis (see link below) says the pipeline will help prevent China and other countries from buying Canadian crude, a product valuable to the United States because it is derived without the security complications associated with Middle Eastern nations. So, Minnesota, the Upper Midwest, and the United States benefit and some of our Middle Eastern enemies lose. Sounds logical to me, and I am hardly a military hawk but I am loyal to my country. It is one of my many biases. We are not perfect but this is our country and we have to look out for our collective interests because Middle Eastern oil producers will not!

According to Enbridge Inc., a Canadian oil company, the pipeline will allow them to increase its U.S.-bound flow of oil sands crude by 450,000 barrels a day, beginning next year. Additional pumping stations could be added in the future at "very low cost" to increase the daily flow to 800,000 barrels, the company says.

Next week, part II on oil sands.

Wednesday, July 29, 2009

Does Waxman-Markey Put U.S. Energy Security at Risk?

One of the arguments that proponents of a cap-and-trade program make is that we need to develop more homegrown sources of energy in order to increase our energy security. They believe a cap-and-trade program will create incentives to produce more renewable energy in the United States by increasing the price of traditional fuels.

There is no question that projected energy growth over the next 30 years will require us to develop numerous sources of energy – both traditional and alternative sources. But it appears Waxman-Markey will create incentives that could actually make us less energy secure in the near term.

The legislation makes the U.S. refining industry responsible for both their facility emissions and the emissions from the end-use of their products – vehicle combustion. Together, facility and vehicle emissions account for approximately 40 percent of total U.S. greenhouse gas emissions. However, the legislation only grants the refining industry two percent of the free emissions permits that will be distributed under the bill.

This significant gap between the emissions U.S. refiners are responsible for under the legislation and the free emissions permits they will be awarded means the refining industry will have to buy permits from other industries in order to be in compliance. Refiners from overseas will only need permits for vehicle emissions, not the emissions from their refineries. This will give them a competitive advantage.

The result is that the bill could create incentives for U.S. refiners to import more gasoline and diesel fuel from abroad and produce less here at home. As the article below points out, that could lead to idled refining capacity or the outright closure of U.S. refineries due to the cost advantage overseas refiners will have. As refining capacity is moved overseas to countries with little or no environmental standards, carbon emissions will rise causing global greenhouse gas emissions to increase.

Are our memories really this short? Just four years ago, following hurricanes Rita and Katrina, politicians were clamoring for more refining capacity to protect against supply disruptions and price volatility. Now Congress passes legislation that could result in increased reliance on imported gasoline and diesel fuel which increases the risk of – you guessed it – supply disruptions and price volatility.

This is yet another example of why a climate change policy must be crafted as part of a global agreement.

“Big Oil’s Answer to Carbon Law May Be Fuel Imports,” Bloomberg News, June 26, 2009

Tuesday, July 28, 2009

Climate & Health Care: When Solutions Become the Problems

My dad had a saying, “Don’t let today’s solutions become tomorrow’s problems.” His point: know what you’re doing and don’t do anything to make matters worse.

As Congress sputters on the President’s health care and climate initiatives, I thought about dad’s advice but concluded that to be applicable to the President’s situation there needs to be a corollary: “don’t let the solution become today’s problem.”

There are a lot of similarities between health care and climate initiatives. Both are major, “changing-life-as-we-know-it” initiatives affecting all Americans with a lot of very complicated moving pieces and competing interests.

Candidly, I agree with President Obama that America should do something to address greenhouse gas emissions (GHGs) and the rising costs of health care.

The problem is that the President’s solutions have become problems and, perhaps, even bigger problems then the problems they are designed to solve. One reason is that the President and Democratic Congressional leaders are trying to convince us that their solutions are cost-free and easy. This just doesn’t pass the laugh test. Americans are used to their political leaders stretching reality, but that stretch has to be within the realm of common sense credibility. And, it’s just not credible to say that we can reduce GHGs without increasing the cost of energy or that health care coverage can be expanded without increasing the amount of money government takes from us.

Another reason the President’s solutions have become the problem is their complexity. The President’s climate and health care initiatives are both mammoth pieces of legislation that most people haven’t read, let alone understand what they do or how they will do it. Obviously, some will lose; some will win; and some will win and lose at the same time. Americans don’t need to know everything about every piece of legislation and are used to (and willing to) make these kinds of trade-offs. But, we need to understand the broad themes and how they are likely to affect us. Unfortunately, the size and complexity of the initiatives prevent such understanding, leaving him unacceptably saying, “trust us, we’re the government, we know what we’re doing and we’re here to help.” No wonder the thinking, swing members of the Congress are balking.

The third reason his solutions have become the problem is the speed he is pushing them. Again, I turn to one of dad’s sayings: “If you don’t have time to do it right the first time, why do you think you’ll have time to fix it the second time?” It was his version of “haste makes waste.” The President wants to make major changes to three of the biggest sectors of the economy (energy, health care and financial services) in less than 12 months. That’s fast; too fast…it’s turned the solution into the problem.

For many, most, the President has won the argument that climate and health care are problems that deserve solutions. But his solutions have become problems. His best course is to slow things down, skinny the bills and focus on improving one or two high leverage elements in each topic and make sure the substance of the efforts match the low-cost rhetoric. For energy, that means focusing on promoting more renewables, enhancing our energy efficiency efforts, and growing the nuclear industry. As for climate? These first items will make a big dent in emissions. In the meantime, spend the intervening time getting an international GHGs reduction agreement and think through how to implement a cap-and-trade program and the other regulatory tools…perhaps a Blue Ribbon Task Force could be convened.

Wednesday, July 22, 2009

You want "Scientific Truth" on Biofuels?....

Many of the environmental and agricultural special interests and advocates who supported corn ethanol and the development of other annual-crop-ethanol forgot to carefully examine the externalities of their idealism and/or greed. They seem to be always invoking the veil of "scientific truth." Well here is some scientific truth for all to carefully examine. Maybe this scientific truth will set them free and teach all an important intellectual lesson. Scientific "truth" is dynamic, not static, or based upon political and/or economic expediency!

Science 17 July 2009:ol. 325. no. 5938, pp. 270 - 271DOI: 10.1126/science.1177970
Policy Forum for the full article

Energy: Abstract

Beneficial Biofuels—The Food, Energy, and Environment Trilemma
David Tilman,1,* Robert Socolow,2 Jonathan A. Foley,3 Jason Hill,3 Eric Larson,4 Lee Lynd,5 Stephen Pacala,6 John Reilly,7 Tim Searchinger,8 Chris Somerville,9 Robert Williams4
1 Department of Ecology, Evolution, and Behavior, University of Minnesota, St. Paul, MN 55108, USA.2 Mechanical and Aerospace Engineering, Princeton University, Princeton, NJ 08544, USA.3 Institute on the Environment, University of Minnesota, St. Paul, MN 55108, USA.4 Princeton Environmental Institute, Princeton University, Princeton, NJ 08544, USA.5 Thayer School of Engineering, Dartmouth College, Hanover, NH 03755, USA.6 Department of Ecology and Evolutionary Biology, Princeton University, Princeton, NJ 08544, USA.7 Center for Energy and Environmental Policy Research, MIT, Cambridge, MA 02142, USA.8 Woodrow Wilson School, Princeton University, Princeton, NJ 08544, USA.9 Energy Biosciences Institute, University of California Berkeley, Berkeley, CA 94720, USA.
* To whom correspondence should be addressed:

Recent analyses of the energy and greenhouse-gas performance of alternative biofuels have ignited a controversy that may be best resolved by applying two simple principles. In a world seeking solutions to its energy, environmental, and food challenges, society cannot afford to miss out on the global greenhouse-gas emission reductions and the local environmental and societal benefits when biofuels are done right. However, society also cannot accept the undesirable impacts of biofuels done wrong.

Biofuels done right can be produced in substantial quantities (1). However, they must be derived from feedstocks produced with much lower life-cycle greenhouse-gas emissions than traditional fossil fuels and with little or no competition with food production (see figure, below). Feedstocks in this category include, but may not be limited to, the following:

The best biofuels. The search for beneficial biofuels should focus on sustainable biomass feedstocks that neither compete with food crops nor directly or indirectly cause land-clearing and that offer advantages in reducing greenhouse-gas emissions. Perennials grown on degraded formerly agricultural land, municipal and industrial sold waste, crop and forestry residues, and double or mixed crops offer great potential. The best biofuels make good substitutes for fossil energy. A recent analysis suggests that more than 500 million tons of such feedstocks could be produced annually in the United States (1).

Sunday, July 19, 2009

Rolling Stone and Me

It isn't that often that I read Rolling Stone Magazine and even less often that I agree with any of its positions. But Matt Taibbi's recent article on Goldman Sachs made me laugh because a year or more ago, I started to see the mortgage plot being recreated with cap and trade climate change policy. Most people thought that it was a wild conspiracy theory though few said anything. But last week Goldman demonstrated, once again, its resilience announcing huge profits. So far, no one has questioned where those profits were generated---at taxpayer’s expense---in the worst recession since 1929.

Taibbi excoriates Goldman Sachs for its role in the Internet, oil and housing bubbles, and then identifies their next great scheme.

“And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an "environmental plan," called cap-and-trade. The new carbon-credit market is a virtual repeat of the commodities-market casino that's been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won't even have to rig the game. It will be rigged in advance.”

It is time American’s realize that it's always about the money now and forever. It is one of the great weaknesses of human nature---greed, which, when mixed with the capitalist spirit, too often leads down the same debauched road. Making matters even more amusing is how often the committed advocates are used/manipulated by the powers that be to make buckets of money while ruining the economy.

Friday, July 17, 2009

US EPA, State Agencies, and Private Attorneys Meet in Chicago, Discuss Environment

There can be little doubt that the philosophy at the US EPA has undergone a dramatic change under President Obama. To more fully understand the new priorities at the US EPA as well as the current priorities of the state environmental agencies of the Great Lakes states (aka EPA Region 5), the American Bar Association Section of Environment, Energy and Resources held a day and a half conference in Chicago: State and EPA Perspectives on Environmental Issues In Region 5.

In what could be one of the preeminent environmental conferences in the Great Lakes region (having played a significant role in the conference I might be a bit biased), the program involved exclusively government speakers, including Commissioner Paul Eger of the Minnesota Pollution Control Agency. Although the conference featured numerous panels discussing aspects of environmental law from Resource Conservations and Recovery Act (RCRA) to the Great Lakes Interstate Compact and everything in between, the two most important presentations were the keynote speech by Bharat Mather, Acting Regional Administrator US EPA Region 5, and the State Environmental Directors Roundtable.

Mather spoke briefly regarding the American Reinvestment and Recovery Act (ARRA), the state-federal environmental partnership and the goals of his new boss Lisa Jackson. Discussing ARRA, Mather noted that the EPA has obligated 72% of its ARRA funds and that the primary issues with implementing ARRA are reporting, the Buy American provision, compliance with the Davis-Bacon Act requirement, and funding of green issues. On the state-federal partnership, he stressed that EPA’s role is oversight of the state agencies and that the focus should be how the two can work together to get things done. Turning to the goals of Administrator Jackson, Mather stressed four areas: 1) science must be the backbone for EPA; 2) EPA decisions must follow the rule of law; 3) EPA actions must be transparent; and 4) environmental justice should be considered in every EPA decision.

Mather then turned to EPA priorities in Region 5. The number one concern, he said, is climate change. This certainly should come as no surprise given the public announcements from Administrator Jackson. But it does reinforce the reality that the question is not whether greenhouse gases will be regulated in the near future, but what the vehicle for regulation will be. Among the other named priorities he discussed were new source permits, reducing diesel emissions, managing overall chemical risks, hazardous waste cleanup, and water quality. He noted particular interest in Minnesota when discussing the asbestos risk in mining and managing risks from perfluorocarbons. He also noted that one of the water quality priorities is addressing water nutrient levels in the Mississippi River as it relates to Gulf of Mexico hypoxia.

Following the keynote speech, Bert Frey, Deputy Regional Counsel US EPA Region 5, hosted a roundtable discussion with the directors of all six state environmental agencies (Indiana DEM, Illinois EPA, Michigan DEQ, Minnesota PCA, Ohio EPA, and Wisconsin DNR). Almost universally, the director concerns involved addressing climate change, improving water quality/wastewater management, and finding a way to accomplish these goals in the face of an ever-shrinking budget. The truly amazing theme in the roundtable was the staggering cost that we face to update our water infrastructure and to deal with storm water management. Time and again, the state directors would note that the tens or hundreds of millions of ARRA dollars dedicated to state revolving water funds did not meet the needs for infrastructure updates (all told, the EPA received $6 billion for water infrastructure, which has been allowed to the states and US territories.

It was not lost on many of us that this was the first time there had been a Region 5 environmental conference since 1999. After listening to the government attorneys and agency personnel speak for a day and half, it is clear that the days of market self-regulation have come to an end. In Minnesota and across the nation, we can expect to see new environmental regulation and a renewed focus on enforcement of existing regulations.

Submitted by Michael J. Mergens

Michael J. Mergens is an attorney at Larkin Hoffman Daly & Lindgren in Minneapolis. His practice includes a broad range of real estate matters, such as environmental permitting and litigation, land use approvals and disputes, and general real estate disputes. He has devoted much of his practice to the regulation of greenhouse gas emissions, which has begun to arise in the environmental permitting processes of various state and federal regulatory bodies. He also tracks the potential for regulations under the Clean Air Act.

Thursday, July 16, 2009

Cap-and-Trade Costs: Lessons from Europe

During the debate on the Waxman-Markey energy and climate legislation, the potential costs to consumers received considerable attention. Mitigating these increased costs was the main focus of the dealmaking that was done to get the bill passed. The focus on cost is not surprising. What is surprising is the range of cost estimates that emerged during the debate.

On the low end were estimates by the Environmental Protection Agency (EPA) and Congressional Budget Office (CBO). EPA estimated the cost of the legislation to be somewhere between $80 and $111 annually per household, while the CBO came in slightly higher at $175 in 2020. The new CBO estimate is much lower than an earlier estimate it did that pegged the cost of a 15% reduction in carbon dioxide at $1,600 per household. On the other end of the spectrum is an analysis by the Heritage Foundation that puts the increased cost at $2,979 per year.

The ultimate impact of a cap-and-trade system need not be hypothesized, so let’s move past the studies and look at a real world example: the European Union. The EU cap-and-trade program went into effect four years ago. Since that time they have seen significant energy price increases, while achieving minimal emission decreases. From 2004-2007, residential energy costs have increased by an average of 16% and industrial electricity rates have increased by 32%. Even in a good economy very few industries can afford a 32% increase in electricity rates. In this economy, it would spell the end for many manufacturers.

The climate bill is currently being debated in the Senate after being passed by the House of Representatives. Hopefully the Senate will have the sense to study the EU experience and reject these kinds of increased energy costs for U.S. businesses.

“Europe's Cap-And-Trade Scheme: A Cautionary Tale for the U.S.,” Investors Business Daily, June 8, 2009:

Monday, July 13, 2009

Climate Bill Uneconomic & Costly: Failing the Good Lawmaking Test, Part II. Let’s Start Over on Climate Legislation

The test of good lawmaking is whether it 1) achieves the desired goals, 2) in the most economic and cost-effective manner, 3) with the fewest unintended consequences, and 4) enlists strong bipartisan support. My last blog posting argued the Waxman-Markey climate bill failed the first element of this “good lawmaking” test because it relies on carbon credit concoctions at the expense of achieving reductions on GHGs.

This posting explains one of many reasons why the House bill fails the second uneconomic element of the good lawmaking test, and why Congress would be wise to start over rather than keep moving forward on the current path.

Economic models can make the climate bill’s cost a wash or impose a very small per person cost. And, this is without factoring the unknowable affects of a changing climate. But no-cost outcomes only happen in Washington, which isn’t very good lawmaking and seems to be disingenuous, naive, or from a flawed belief that there is no cost in massive wealth redistribution.

The underpinning of Waxman-Markey is to impose a cost for emitting GHGs into the atmosphere. Supposedly, such a cost will encourage the emitter to either stop emitting GHGs completely if they can, or reduce its GHGs to a level where the costs of further reductions exceed the costs of emitting. Or, since Waxman-Markey uses the “cap and trade” methodology, an emitter may buy offsets from someone who has reduced their GHGs emissions more than they were required to. In theory, this cap and trade approach would yield the most economic GHG reductions.

However, as mentioned in my previous posting the Democratic majority distorted the offset program. Besides undermining the potential for actual GHG reductions, these distortions make figuring out how much it will cost to comply with the bill impossible. A host of dueling economic models are trying to figure out what the macro and micro costs of the Waxman-Markey bill will be. But, given its complexity, on-the-fly amendments and competing glass half-full versus half-empty assumptions…makes accurate cost estimates impossible, even if you agreed with the models. Thus, there is no way to know what the bill will cost. Unknown costs are more costly than known costs because they create risk and uncertainty. If you can’t ascertain the risk, your only rational course is to assume the worst thereby increasing the costs and uneconomic actions.

The unknown risk from the Waxman-Markey bill is one, failing; the other comes from what I call the “uneconomic averaging” of costs and benefits. Take, for example, a person with his head in the oven and feet in the refrigerator, so his average temperature is a normal 98 degrees. Clearly, the extremes are unpleasant but if one only looks at the average, one can incorrectly assume no harm. Or, take another more realistic example: my smart daughters will soon be going off to college; they will do well, get good jobs, and become valued taxpayers. Their taxpaying value to society will soon exceed what I paid for their college. Thus, society will clearly be economically better off; they will be happy so I’ll be happy…but I won’t be economically better off, in fact, I may be worse off since the opportunity cost of that money was investment in my retirement fund.

Advocates of the Waxman-Markey bill cite climate models that say the bill will have little costs. But, I doubt it and that can only be correct if viewed from this averaging approach. From a lawmaking perspective, such results are uneconomic short-term outcomes with the costs unfairly borne by just a few. If the models looked at the entities that actually have to pay the cost of the carbon reductions, those folks won’t get their money back (despite government redistributive promises). They won’t even be the happy but impoverished father whose girls visit him in the nursing home!

Thus, because of the unknown risks and the uneconomic “averaging” of the costs at the expense of those who will have to pay them, the Waxman-Markey bill fails the second element of the good lawmaking test. And, Congress should start over and simplify the bill so the American people know the direct and indirect costs…it is this simplicity that has people supporting a carbon tax.

Monday, July 6, 2009

Waxman-Markey Won’t Achieve Goals Failing the Good Lawmaking Test, Part I: Let’s Start Over on Climate Legislation

A couple weeks ago the U.S. House of Representatives barely passed a 1,200-page bill designed to address the nation’s greenhouse gas emissions. The “golf clap” applause for the bill comes only from those who believe passing something, anything, is better than passing nothing at all.

While I am among those who believe addressing GHGs is important, I am not praising the House’s achievement. Passing an ineffective, costly bill is worse than doing nothing. In fact, what the House’s “accomplishment” offers is more an example of a failed legislating experiment than good lawmaking.

There are four criteria for good lawmaking: the law will 1) achieve the desired goals 2) in the most economic and cost-effective manner 3) with the fewest unintended consequences and 4) has strong bipartisan support.

In this and subsequent blog postings, I’ll explain why the House bill fails all four good lawmaking criteria and that starting over is the best course of action.

I believe the Waxman-Markey bill is unlikely to achieve the desired goal of reducing GHG emissions.

Many in the environmental community share this concern due to the last minute provisions added to the bill that undermine its GHG-reducing elements. These last minute provisions were designed to garner Democratic votes to pass the bill. Many dealt with the use of agricultural offsets for carbon credits designed to enlist the support of Democrats from rural agricultural districts. Terrestrial sequestration of carbon can come from changing farming practices, converting cultivated lands to prairie, planting trees, and preserving forests. I’m not so sure the environmentalists concerns are correct; but they may be. Such approaches, like all lifecycle calculations, need more analysis.

But, I have a more concrete reason to question the effectiveness of the bill: it turns GHG reductions into a carbon credit accounting board game, sort of like Monopoly. Who can get the credits? How do they get them? How can we make the credits cheaper? What can be done with the credits? etc. This emphasis on the credits instead of GHG reductions creates a disconnect that assures that actual GHG reductions are unlikely to occur and certainly not to the levels desired by the bill’s authors and supporters.

Notice how the compromises made on behalf of agricultural interests took the form of allocating carbon credits for offsets? And, that is just one industry sector where “credits for offset” political trade-offs were made to curry favor or to allegedly lower economic costs of the bill. I fear that by focusing on credits instead of actual GHGs reductions no reductions will occur, leaving the worst of all worlds: higher energy costs, a fool’s gold carbon market created and increasing atmospheric concentrations of GHGs. How does that achieve the bill’s goals? It doesn’t; failing the first test of good lawmaking.

Accordingly, Congress should start over. The legislation should focus on getting actual reductions, even if they are small at first. That would put them on the good lawmaking path.

Friday, June 26, 2009


CBO: Climate Change Consumer Cost Estimates: Just Wrong

After all these years of carefully observing government data and its continuous revisions, now we are being told by the Congressional Budget Office (CBO) that the climate change legislation before Congress for a vote today, championed by Congressman Henry Waxman of California, will cost consumers pennies a day. Common sense says changing an economy from a carbon dependent economy to a "renewable energy" economy will save Americans money in the "long-term." The old common sense quip my grandmother used to say was "in the long-term we are all dead." Who will be around in the long-term to hold the politicians and environmentalists accountable if they are wrong?

Leaving the conflicting analytics on both sides of the debate out for our purposes, I would like you to consider how such a sea change in energy will occur without totally rupturing our already tenuous economy. I am not talking in the abstract but rather about whether there will be "green" fuel to power our cars, boats, snowmobiles, four wheelers, etc.; energy to cool us in summer and keep us cozy in winter with less oil and coal use at virtually no change in price from our current circumstance. Wow, that is a mouthful.

For myself, I do not trust the politicians and special interests any more than I trust the large private sector banks or the same politicians who promised "affordable housing" for all. The difference is, of course, in the private sector businesses fail, greedy people go to jail, there are lawsuits. Where is the accountability in the public sector? With the uninformed and easily manipulated voter?

Affordable housing, affordable energy, affordable health care...government has never demonstrated taxpayer affordable anything when compared to the ability of uncontrolled market competition. Sure, markets have weaknesses but they also have "creative destruction" to purify themselves when they go awry. What does government have to hold it accountable? Uninformed voters who are easily manipulated by hollow political promises driven by special interests. Remember, I am the guy who supports taking away all business subsidies provided by government. In order for free markets to work, they have to be free of all government attachments.

The cost to consumers and the macro-economy of this Waxman Climate Change legislation will be enormous, beyond the comprehension of most people to adapt to. If not, why did Congressman Peterson demand that agriculture, a major emitter of greenhouse gasses, be exempted from the bill by having the fox guard the chicken coop rather than EPA? Our hope is that the Senate sees the coal/nuclear-provided light before unemployment hits 12-15%!!!

According to the EPA, the cap and trade policy has a relatively modest impact on U.S. consumers assuming the bulk of revenues from the program are returned to households.
– Average household consumption is reduced by 0.03-0.08% in 2015 and 0.10-0.11% in 2020 and 0.31-0.30% in 2030, relative to the no policy case.
– Average household consumption will increase by 8-10% between 2010 and 2015 and 15-19% between 2010 and 2020 in the H.R. 2454 scenario.
– In comparison to the baseline, the 5 and 10 year average household consumption growth under the policy is only 0.1 percentage points lower for 2015 and 2020.
– Average annual household consumption is estimated to decline by $80 to $111 per year* relative to the no policy case. This represents 0.1 to 0.2 percent of household consumption.
– These costs include the effects of higher energy prices, price changes for other goods and services, impacts on wages and returns to capital. Cost estimates also reflect the value of some of the emissions allowances returned to households, which offsets much of the cap and trade program’s effect on household consumption. The cost estimates do not account for the benefits of avoiding the effects of climate change.
– A policy that failed to return revenues from the program to consumers would lead to substantially larger losses in consumption.

Think about this last sentence for a minute. If the climate change legislation (Waxman-Markey) "failed to return revenues from the program to consumers would lead to substantially larger losses to consumption." In common sense speak, this is consumer cost increase. So, please ask yourself, if this program generates billions in revenue, what are its costs to implement? Your job? Your family's economic security?

Do you trust the politicians to continue to return the revenue to you to offset the costs for the next 20-30 years? I do not. All of this ignores the fact that if consumers do not feel the cost of the transition from a carbon-intense economy to a less carbon-intense economy what will force them to change their behavior to a more conservationist mode.

Finally, remember, when Medicare was awaiting Congressional vote in 1965, President Lyndon Johnson and most Congressional leaders promised long-term savings by insuring senior citizens. At that time they used the Social Security surplus to pay for the program. Since then, of course, in the "long-term" the medicare tax was imposed at 3% of income. Now Medicare is on the verge of bankruptcy and rather than fixing it, our leaders are inventing another "critical program" that, we are told will create millions of green jobs in the future and save Americans billions of dollars while "saving the planet." Steelworkers, oil drillers will retrain to become farmers, environmental scientists, and entrepreneurs! You betcha. That will happen shortly after I catch the state record crappie!

Remember the old adage, "Fool me once, shame on you. Fool me twice shame on me."

Monday, June 15, 2009

Cap and Trade: YOU, not someone else, are going to pay more, period.

Here is what this Common Sense Curmudgeon has been thinking about this weekend:

Let's think about cap and trade. Start at the bottom - the oil companies get hit with higher costs, so who do they pass that onto? Fuel companies get hit with higher costs on top of that and put the excess onto whom? Trucking companies who bring goods to stores charge more because their fuels are costing more, and that goes onto whom? Stores pay more for their goods to be delivered so the cost increases to protect their profits. Who is going to pay for that? YOU are.

It's pretty simple and easy to think through once you open your mind and think about everything that is going to increase in price for the consumer. Is every company going to absorb their own increases and take lower profits and/or pay their workers less, cut their benefits? Highly doubtful, don't you think? Who would want to do that? Would you want that to happen to you? Are you willing to pay this price for less carbon dioxide in the air?

So YOU are going to pay for it and if you can't figure that out yourself, take a look at the issue yourself and see if you see things differently. Even if you are the most dedicated environmentalist, friend of the earth and all of its creatures, cap and trade will not work because, in the end, most Congresspeople will not vote for something that will damage their state's economy or raise voter costs even if some believe that they can pin the increases on the old tried and true "business did it," it was someone other than us. So, while the politicians may pass something by the end of summer (50-50 chance), it will do nothing for the environment but it will cost most of us thousands in increased consumer costs per year. But I don't think you need someone else to tell you what is going to be happening over the next few years and beyond...but I will...prices are going to rise and rise and rise with little or no reduction in greenhouse gases.

Oh, and I have mentioned this ad nauseum: Wall Street, big business, and some environmentalists will all get rich on this post-mortgage, environmental-ponzi scheme. Remember, my friends on this blog have been telling you these things for months. Soon we will know, unless we tell our Congresspeople to kill this stupid idea while there is till time and the majority of Americans still have jobs and can afford groceries!

Sunday, June 14, 2009

Goldilocks, Climate Legislation and Republican Engagement

In the story of Goldilocks and the Three Bears, Goldilocks, lost in the woods, comes across a cabin. In that cabin are three bowls of porridge, three rocking chairs, and three beds. She tests each of them and concludes that two of each is unacceptable; they are either too hot or too cold, too big or too small, too hard or too soft…but one bed, one bowl of porridge, and one rocking chair was “just right” and she enjoyed them.

I thought of this story as I read reports that the House Republicans were finally offering a climate bill of their own last week. From what I have heard, their proposal is no more “just right” than the Waxman-Markey bill, appearing to be too little, too late, (as opposed to the Waxman-Markey bill’s too much, too soon). Nonetheless, I am very glad that the Republicans are finally engaging on the climate issue.

Under the guise of addressing GHGs, the two bills do different things. The Democratic bill wrongly tries to re-engineer the economy through energy policy; while the Republican bill fittingly tries to achieve energy independence. Unfortunately, neither bill is likely to reduce GHGs.

But, just as Goldilocks had to pursue a trial-and-error process, so does Congress in its search for that “just right” climate bill that will set in motion GHG reductions at the lowest cost. They obviously haven’t found it yet but having the Republicans constructively engaged in this testing is heartening.

Republican engagement on climate is important for five reasons. First, I believe that climate change is real and this is not whether we do something but that the nations of the world do that “something” in a thoughtful, economic and deliberative way. I believe that Republicans can craft such a plan better than Democrats. Second, barring some dramatic change in the political landscape, eventually there will be legislation addressing GHGs and Republicans would be better off being a part of that parade then run over by it. Third, legislating, and politics in general, is a contact blood sport, and while it appears that victory stems more from numerically superior coalitions of disparate special interest constituencies, victory ultimately comes from superior ideas. So, if Republicans stay in the Uecker seats booing and not fielding a team of climate ideas, there’s no way to win either politically or legislatively.

Another reason for Republican engagement is that key constituency groups, especially businesses with national and international scope, need us. Whether we like it our not, in the absence of national climate legislation, states are undertaking their own climate initiatives - can you say “California?” This trend puts businesses in a growing box of mixed, competing and potentially very costly state-by-state regulation. Preemptive national legislation is their only pathway to rationality and if Republicans aren’t there to help them, then out of desperation they’ll turn to Democrats. That’s not good for them, the nation, or Republicans.

Finally, there are some very important, constructive ideas (like encouraging nuclear power) that will be orphaned if not championed by Republicans.

In sum, constructive Republican engagement and even leadership on the climate issue with our superior ideas, traditional skepticism of governmental solutions, and cautious fiscal sensibilities is what America needs on the climate issue. Hopefully, the recent proposal by House Republicans signals my team’s entrance onto the playing field to bravely test the options…but only settling for the yet-to-be-developed “just right” one.