Inside Energy

U.S. & China GHG Emissions: Diverging Trends

2010-05-17T10:49:00.000-07:00

Recently, the U.S. Energy Information Agency (EIA) released a report on energy-related carbon dioxide emissions in 2009. Carbon dioxide emissions from energy use make up over 80 percent of our country’s greenhouse gases. The report showed that last year the U.S. had its largest absolute and percentage decline since the EIA started keeping statistics in 1949. Carbon dioxide emissions declined by 7 percent - or 405 million metric tons.

The report cites three factors that led to the reduction in emissions: per capita gross domestic product (GDP which is economic output), energy intensity (the amount of energy consumed relative to total output or GDP) and carbon intensity (the amount of carbon produced per $1,000 of GDP). Although the economic downturn had been expected to lower emissions, the slowdown in economic growth only accounted for about a third of the reduction. The remainder was driven by greater energy efficiencies and less energy-intensive activities in our economy. Energy intensity has declined by an average of 2 percent from 2000 to 2008. Carbon intensity also decreased as the cheap price of natural gas caused many utilities to burn it for electricity generation instead of coal.

The U.S. performance stands in stark contrast to China's performance. The New York Times article below points out that China’s growing demand for power from oil and coal has led to the largest six-month increase in man-made greenhouse gases ever by a single country. Advocates of climate change legislation often cite the growth of renewable energy in China as a sign that they are doing more than the U.S. However, these advocates ignore the explosive growth in the consumption of energy from traditional sources that is dwarfing renewable energy use. Part of the reason for the increase, according to the article, is that China’s economy is shifting from light export industries to heavy industrial production - often heavy industrial production that used to be done in cleaner, better regulated western economies. The increase in energy-intensive industries and increased use of coal is making China’s overall economy less energy efficient, reversing a four-year trend of energy efficiency gains.

The lesson here is that growing energy efficiency and a decrease in carbon intensity is beginning to break the link between economic growth and carbon dioxide emissions in the U.S. Continuing that trend, largely driven by the market, is the way to reduce emissions without harming the economy, as opposed to adopting a large, bureaucratic cap-and-trade program. And these news items are a further reminder that developing countries with major economies are the current and future driver of man-made greenhouse gas emissions. Without action by them, what we do here in the U.S. will have little impact on the global climate, but a large impact on our economy.

“The Carbon Recession,” Wall Street Journal, May 10, 2010. http://online.wsj.com/article/SB20001424052748704370704575228311111072860.html

“China’s Energy Use Threatens Goals on Warming, New York Times, May 7, 2010. http://www.nytimes.com/2010/05/07/business/energy-environment/07energy.html?src=busln

EIA Emissions Report: http://www.eia.doe.gov/oiaf/environment/emissions/carbon/index.html

Mt. Eyjafjallajokull

2010-04-26T13:33:00.000-07:00

Recently, I visited Mt. Eyjafjallajokull in Iceland to see this volcano firsthand and speak with scientists studying the eruption and its potential impact on our climate. Volcanoes are one of the sources of naturally occurring greenhouse gases and large eruptions in the past have impacted our climate.

During an eruption, volcanoes release a number of gases into the atmosphere. The most abundant gases typically released from volcanoes are water vapor, carbon dioxide and sulfur dioxide. Scientists have calculated that volcanoes emit between about 130-230 million metric tons of CO2 into the atmosphere every year.

While it is unclear at this time how much total CO2 is expected to be released from the current Mt. Eyjafjallajokull eruption, the 1991 eruption at Mt. Pinatubo in the Philippines was estimated to have released 42 million metric tons of CO2, roughly the same as the amount emitted by the state of Montana in 2005. The eruption at Mt. Pinatubo was one of the biggest volcanic eruptions in the 20th century, and Mt. Eyjafjallajokull is significantly smaller by comparison. Current estimates place CO2emissions from Mt. Eyjafjallajokull at 150,000 to 300,000 metric tons daily, but it is unclear how long these levels will be sustained.

But the effect of volcanoes on the Earth's climate goes beyond CO2. The sulfur dioxide emissions from volcanic eruptions are also thought to be responsible for the global cooling that has been observed for a few years after a major eruption. Emissions of SO2 from an active volcano can reach the stratosphere where they convert to tiny persistent sulfate particles. These sulfate particles reflect energy coming from the sun, which produces a widespread cooling effect by preventing the sun's rays from heating the Earth.

Mt. Eyjafjallajokull is a stark reminder of how powerful nature is and how little we can control it. This eruption grounded thousands of flights and stranded tens of thousands of travelers in Europe. Yet some people in the climate debate seem to think humans control everything. We need to set aside that hubris. Politicians who use science to push their agendas would be wise to learn from this event and understand that our current climate models have serious limitations. We would be better served in pursuing realistic solutions and not expending tremendous financial resources under the false assumption that we humans control everything.

“Volcano emitting tonnes of CO2 daily,” April 20, 2010 http://news.smh.com.au/breaking-news-world/volcano-emitting-tonnes-of-co2-daily-20100420-sppr.html

Video of Mt. Eyjafjallajokull erupting

I Told You So

2010-04-16T20:15:00.000-07:00

Goldman Sachs: The beginning of "Truth Be Told..."

In several of my blogs I have mentioned how Goldman Sachs and Morgan Stanley, having destroyed the mortgage market and crashed the U.S. economy, have now moved their derivative trade to cap and trade where they will do it all over again.

It disgusts me to have my extreme cynicism proven correct -- politics has always been about moving money around -- rewarding those who help politicians get elected. Goldman Sachs and Morgan Stanley gave over $25m to politicians in the last election. Taxpayers bailed them out with TARP money costing billions.

Enough is enough. No business is too big to fail. Let 'em go down or put 'em down: Goldman or the politicians who support them. Time to punish (read regulate) those who cannot control their greedy impulses!

The Changing Climate Debate

2010-03-29T13:42:00.000-07:00

It has been an eventful few months for people following the "settled" climate change debate. Last December began with the Climategate scandal involving emails that have raised questions about the data the International Governmental Panel on Climate Change (IPCC) has relied on to make its forecasts. That was followed by the spectacular failure at the Copenhagen Climate Change Conference. January brought an upset special election in Massachusetts that made already skittish moderate Democrats even less inclined to vote on a climate change bill. Then there was the discovery that some of the IPCC’s most extreme predictions about the impact of climate change were based not on peer-reviewed science but reports by environmental advocacy groups. And finally, the head of the U.N. Climate Change treaty process recently resigned and said that an international climate agreement was unlikely this year.

The momentum for passing climate change legislation that had been building over the last few years appears to be crumbling under the weight of misguided priorities. A healthy discussion about the science or realistic emission reduction goals was replaced by schemes to create a carbon market Wall Street could profit from and advocating an unprecedented level of government central planning.

All of these developments are a sign that the entire conversation needs to be changed. In many ways, the debate is stuck in the 1990s and needs to instead focus on the realities of today. Developed versus developing countries is becoming an irrelevant concept. Globalization has fueled the rapid economic growth of several Asian countries, and made it clear that emissions-dependent industry can rapidly shift operations to avoid regulation. The focus needs to be on all major economies, where the bulk of emissions are generated now or will be in the future. All major economies need to be on board if a global climate change solution is going to be effective.

Energy security needs to be a front and center concern. We cannot take our energy resources for granted. China sure isn't. China is investing all over the world in traditional and alternative forms of energy. They are investing in the Canadian oil sands, oil reserves in Africa, and produce 95 percent of the world’s rare earth elements that are essential to the manufacture of wind mills and hybrid car batteries. They are securing their energy future while we dither over policies that will do nothing to address global greenhouse gas emissions or energy security. We need to develop our domestic energy resources and tap into the resources of friendly trading partners like Canada and Mexico.

If we don’t change the conversation and our priorities, we will be less energy secure and will have done nothing to reduce global greenhouse gas emissions.

What Are We To Make of This?

2010-03-10T13:24:00.001-08:00

For a little over two years, I have been fortunate enough to have had the time to carefully examine issues of public importance like global warming. The "science," as the proponents of global warming like to say, is a closed book and those who refuse to accept it are immediately labeled "deniers." Having read most of the "science," I was, until six months ago, mostly convinced that it was settled.

As I have stated in this space previously, I am concerned, and will remain so until convinced otherwise by observation, and the application of logic and reason, that the solutions to the greenhouse gas conundrum need to be carefully scrutinized so that they do not make matters worse rather than better.

So far, national cap and trade, regional cap and trade, and cap and trade, in general, make me nervous because I pride myself on not being fooled more than once. When Goldman Sachs, Morgan Stanley, and other "banks" are major supporters of this solution, like they were of making housing more affordable through the use of "derivatives" and other calculus (that is neither transparent nor particularly well understood 2.5 years into the housing catastrophe!), I remain highly skeptical of cap and trade, of any variety, period, and so should you.

However, putting the half-baked but lucrative for the banks and investors, cap and trade game aside for a minute, what are we to think of the March 5, 2010 SCIENCE article entitled,

"Contributions of Stratospheric Water Vapor to Decadal Changes in the Rate of Global Warming"?

Now this article really does confuse me since, if the "science" is settled, well, read the summary for yourself and, if you have the tenacity read the whole article, and you decide whether healthy skepticism is really denial or, in fact, highly rational and in the general public's best interest. Before we poor billions down the next "housing affordability-type" rat hole, "greenhouse gas amelioration," it would be highly logical if the most prestigious science publication could help us resolve the "science" of the issue more precisely and "permanently."

Originally published in Science Express on 28 January 2010
Science 5 March 2010:
Vol. 327. no. 5970, pp. 1219 - 1223
DOI: 10.1126/science.1182488

RESEARCH ARTICLES

Contributions of Stratospheric Water Vapor to Decadal Changes in the Rate of Global Warming

Susan Solomon,¹ Karen H. Rosenlof,¹ Robert W. Portmann,¹ John S. Daniel,¹ Sean M. Davis,¹^,2Todd J. Sanford,¹^,2 Gian-Kasper Plattner³

Stratospheric water vapor concentrations decreased by about10% after the year 2000. Here we show that this acted to slowthe rate of increase in global surface temperature over 2000–2009by about 25% compared to that which would have occurred dueonly to carbon dioxide and other greenhouse gases. More limiteddata suggest that stratospheric water vapor probably increased between 1980 and 2000, which would have enhanced the decadalrate of surface warming during the 1990s by about 30% as comparedto estimates neglecting this change. These findings show thatstratospheric water vapor is an important driver of decadalglobal surface climate change.

¹ National Oceanic and Atmospheric Administration (NOAA) Earth System Research Laboratory, Chemical Sciences Division, Boulder, CO, USA.
² Cooperative Institute for Research in Environmental Sciences, University of Colorado, Boulder, CO, USA.
³ Climate and Environmental Physics, Physics Institute, University of Bern, Sidlerstrasse 5, 3012 Bern, Switzerland.

Coming Soon to a State Capitol Near You: Climate Change

2010-01-26T15:06:00.000-08:00

Having come up empty in Copenhagen and facing defeat in the U.S. Senate, advocates for climate change legislation are retreating to the states.

No meaningful progress on an international climate change treaty was made at the Copenhagen Climate Change Conference. Key members of the U.S. Senate now predict that cap and trade won't see the light of day this election year either. But in our state capitols, proponents of carbon regulation are plowing ahead.

At the end of 2009, 11 northeastern states committed to develop a low-carbon fuel standard (LCFS) for their region. These states make up the Regional Greenhouse Gas Initiative (RGGI), which has already imposed a cap-and-trade program for electric utilities. The result: these states have the highest retail electric rates in the country (http://www.eia.doe.gov/cneaf/electricity/epm/table5_6_b.html). Now they want to create an LCFS, which will drive up gasoline and diesel costs for consumers.

Not to be outdone, the Midwest Governors Association has made design recommendations for a cap-and-trade system and is preparing recommendations for an LCFS for the six states participating in its Greenhouse Gas Emissions Accord. Meanwhile, Minnesota and Michigan have introduced LCFS legislation, while Wisconsin is set to begin debating an omnibus climate change bill.

You won't be surprised to learn that western states are pursuing similar policies on a regional level and individually. Oregon passed LCFS legislation last year and now Washington is also considering establishing one.

And then there is California, the state responsible for developing these questionable policies. California’s LCFS goes into effect next year and its cap-and-trade program starts in 2012. Those two policies are the flagship programs for The Golden State’s climate change efforts and the success or failure of these actions in California will influence state-level activity across the country.

Other states should be wary of following California’s lead. California has proven to be a shining example of fiscal mismanagement, and is well on its way to legislating itself into junk bond status. Many of the impending climate regulations in that state are causing manufacturers to seriously consider closing shop for good or relocating their operations. In order to prevent further harm to the economy, one California state legislator is currently getting signatures to put an initiative on the ballot for the next election that would bar the state’s cap-and-trade program from going into effect until the state’s unemployment rate dips below 5.5 percent (the state’s unemployment rate is currently 12.3 percent, third highest in the country).

China and India made it clear in Copenhagen that they have no intention of committing to binding emission reductions. They would not even agree to international monitoring, reporting and verification of their emissions.

Most states are facing continued budget deficits and high unemployment. Climate policies that make businesses less competitive with other regions of the country and -- more importantly -- the world won’t help the situation. We need to make sure our state leaders understand that piecemeal policy is bad policy.

Copenhagen Update: What's Next?

2009-12-21T05:11:00.000-08:00

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.

Copenhagen Update: Broken Process

2009-12-19T15:24:00.000-08:00

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.

Copenhagen update: no entry

2009-12-18T07:40:00.000-08:00

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?

Copenhagen update: It's about the money

2009-12-17T14:37:00.000-08:00

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

2009-12-17T10:35:00.000-08:00

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.

Copenhagen update: the religion of climate change

2009-12-16T07:17:00.000-08:00

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.

Copenhagen conference update

2009-12-15T13:29:00.000-08:00

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.

Biodiesel mandate – at what cost?

2009-12-13T19:01:00.000-08:00

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.

Live from Copenhagen

2009-12-09T13:11:00.000-08:00

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.

Cap-and-trade demands international solution

2009-11-23T08:54:00.000-08:00

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

2009-11-23T07:07:00.001-08:00

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:

http://minnesota.publicradio.org/display/web/2009/09/15/alberta-clipper-pipeline/

Let's Trust Science to Fix Climate Change

2009-10-28T07:53:00.000-07:00

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:

http://www.theatlantic.com/

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.

'Competitive edge’ big concern in climate change debate

2009-09-30T08:35:00.000-07:00

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.

LCFS: Part 1: Status Update Part 2: Analysis

2009-09-29T07:05:00.000-07:00

Part 1: CURRENT STATUS OF LOW-CARBON FUEL STANDARD LEGISLATION

FEDERAL LEGISLATION:

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.

STATE UPDATES:

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.

Part 2: ANALYSIS

· 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.

Business Organizes Fight Opposing Waxman Markey

2009-09-01T06:25:00.000-07:00

"Those who do not stand up for their own rights will certainly lose them" (theCommonSenseCurmudgeon@blogspot.com).

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.

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

2009-08-21T09:44:00.000-07:00

http://www.eenews.net/features/documents/2009/08/21/document_cw_01.pdf

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.

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

2009-07-29T15:35:00.000-07:00

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
http://www.bloomberg.com/apps/news?pid=20601109&sid=avLVPogS6lh0

Climate & Health Care: When Solutions Become the Problems

2009-07-28T09:10:00.000-07:00

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.

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

2009-07-22T07:17:00.001-07:00

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

http://www.sciencemag.org/current.dtl 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: tilman@umn.edu

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).
CREDIT: M. TWOMBLY/SCIENCE

Rolling Stone and Me

2009-07-19T17:58:00.000-07:00

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.

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

2009-07-17T08:09:00.000-07:00

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.

Cap-and-Trade Costs: Lessons from Europe

2009-07-16T13:39:00.000-07:00

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: http://www.investors.com/NewsAndAnalysis/Article.aspx?id=478980&Ntt=cap+and+trade

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

2009-07-13T07:16:00.000-07:00

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.

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

2009-07-06T19:39:00.000-07:00

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.

CBO CLIMATE CHANGE CONSUMER COST ESTIMATES: JUST WRONG

2009-06-26T07:49:00.000-07:00

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."

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

2009-06-15T09:02:00.000-07:00

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!

Goldilocks, Climate Legislation and Republican Engagement

2009-06-14T08:10:00.000-07:00

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.

The consumer deserves the whole truth on corn ethanol

2009-06-11T09:33:00.000-07:00

Billy DeFrain’s outrageously inaccurate press release on behalf of the Nebraska Ethanol Board released June 10 is just another example of the corn-lobby-governmental disinformation campaign regarding the consumer costs of ethanol-diluted gasoline.

The corn ethanol advocates argue that the two most important points in favor of corn ethanol production are (1) energy independence and (2) fuel switching. Supply and demand microeconomics tell us that adding a new energy supply should reduce prices consumers pay at the pump. A look at the facts reveals something else.

First, it is imperative to understand that if we use corn to produce ethanol, less of it is available to feed the animals that we like to eat which increases pork, beef and chicken prices. Consumers do not win, farmers and ethanol producers do. While that may play in some parts of mid-America, it doesn’t reduce consumer cost, net. And net is what matters to those of us who buy food for our families and gasoline to get them.

Second, the North Carolina Cooperative Extension Service periodical AG-687, hardly the bastion of “big oil”, states, “A gallon of ethanol does not contain as much energy as a gallon of gasoline.” This means that ethanol is not as energy productive as unleaded gasoline (76,000 BTUs per gallon versus 114,000 BTUs).

According to Mr.DeFrain, public information officer for the Nebraska Ethanol Board, in the aforementioned press release, June 10, “If all the fuel sold in Nebraska in the past five years was E-85, Nebraskans would have saved $2.6 billion.” This outrageous, fantasy proclamation, flies in the face of scientific fact: E-85 causes a noticeable drop in fuel economy, meaning that the consumer’s vehicles must use more of it to travel the same distance than when burning 100% unleaded gasoline. The North Carolina Cooperative Extension Service estimates this drop to be in the 20-30% range, “depending upon the vehicle make and model.” Again, this is the result of the fact that E-85 contains 28% less energy than a gallon of regular gasoline.

A comparison of unleaded gasoline versus E-85 fuel economy values for all flex-fueled vehicles can be found at: http://www.fueleconomy.gov/. Check my argument out for yourself. I suspect that you will find the data enlightening.

In conclusion, our economy is suffering because too many of us trusted what we were told about mortgages for our homes from the vested interests who financially benefited from the hype and the government officials, at all levels, touting “affordable housing for all.” Now, the Nebraska Corn Ethanol Board and others would have us believe that corn ethanol will provide affordable energy for all. I, for one, will not be fooled twice!!!

The (Long) Road to Copenhagen

2009-06-08T15:59:00.000-07:00

All negotiations begin with some positioning at the outset as parties try to gain early leverage to ultimately get as much of what they want as possible. There is positioning and then there is absurdity, which is the only word to describe China’s opening position in the run-up to Copenhagen where a new international climate treaty will be negotiated in December.

China believes “developed” countries should reduce emissions by 40 percent from 1990 levels by 2020. As for “developing” countries, they would be allowed to balance efforts to combat climate change with the need to develop. On top of that, China thinks “developed” countries should fork over 0.5 to 1 percent of their annual gross domestic product to help other nations cope with global warming and reduce greenhouse gas emissions.

First, let’s realistically deal with the idea of “developed” and “developing” countries. China is not Ethiopia. They are flush with cash and buying major foreign assets like oil and mining companies around the globe. They have accumulated over $1.5 trillion in U.S. currency reserves. This is not your father’s “developing” country.

Testimony before the Senate Foreign Relations Committee on June 4 makes it clear that not including China will render any international agreement meaningless because it won’t make a dent in global greenhouse gas emissions. These two snippets of testimony say it all.

“In 2006, China added 90 gigawatts of coal fired power capacity—enough to emit over 500 million tons of CO2 per year for 40 years; by comparison, the European Union’s entire Kyoto reduction commitment is 300 million tons of CO2.”

- Elizabeth Economy, Director for Asia Studies, Council on Foreign Relations

“[T]he current pace of migration of about 15 million people per year moving into cities is likely to continue for another 15-20 years. The resulting requirements for new power generation, building construction, transportation, education, health services, etc., means that, effectively, China has to build urban infrastructure and create urban jobs for a new, relatively poor city of 1.25 million people every month, and that will likely continue for the better part of the next two decades.”

- Kenneth Lieberthal, Visiting Fellow in Foreign Policy, Brookings Institution

I hope the Obama Administration does not appease China and holds a firm line in making sure everyone is accountable for making emission reductions. Otherwise, Copenhagen will simply be Kyoto II.

Prediction--No Climate Bill in 2009: Blame Game Obscures Lessons

2009-06-07T16:50:00.000-07:00

It may be premature to predict the demise of federal climate legislation for the year, but I’ll take the risk and do so anyway: the overwhelmingly Democratic Congress will not pass climate legislation this year. This prediction seems to fly in the face of President Obama’s desires, words of congressional leaders, the deceptive “progress” in the U.S. House of Representatives, and candidly, my personal desires.

This makes the blame game for the defeat the next big thing.

Obviously, the Democratic leaders will blame Republicans, business interests who didn’t agree with them, and conservative anti-climate naysayers. Some of this will be accurately placed, but most will simply be political blame game trash-talk. Unfortunately, this blame game and political posturing will obscure the real reasons of the failure and the lessons that could be learned that would result in a bill in 2010 or more likely 2011.

Real reason #1 of congressional failure on climate is that the President’s driving motivation for pursuing climate legislation is to raise revenue. His secondary motive appears to appease his environmental constituencies. The next motivation seems to be to have something, (anything?) for when the world’s climate negotiators meet in Copenhagen in December. Achieving significant GHGs in a low cost way is a distant fourth. These mixed up priorities doomed climate legislation from the beginning.

Real reason #2 of congressional failure on climate is that dealing with GHGs if done wrong can be very, very, very expensive. And, wrong and expensive is how the U.S. House bill seems to be going. Thus, while some banks may be too big to fail, some legislation is too big to not fail. It tries too much, too quickly at too great an expense.

Real reason #3 of congressional failure on climate is that GHGs are a global problem that requires a global solution. An international solution is needed before national solutions will be environmentally effective. Just as it is unwise for a single state or region to unilaterally address their GHGs, no nation (even one as big as the USA) can tackle this issue by itself.

Real reason #4 of congressional failure on climate is that successfully tackling the issue is very, very hard and needs the Congress’ undivided attention. And, that’s just not happening. Besides energy and climate issues, the President is asking the Congress to deal with health care, banking, education, the closing of Gitmo, budget bills, and of course, the nomination of Judge Sotomayer to the Supreme Court. These issues will distract the Congress, preventing it from focusing on the climate.

Real reason #4 of congressional failure on climate is that there are just too many substantive and political balances that need to be achieved. For example, Congressmen Peterson and Walz have already expressed their concerns with the House climate bill because of how it treats ethanol and agriculture. Then there are the balances between the House and Senate.

These are the real reasons that there will be no climate bill this year. Political gamesmanship and special interests may exacerbate these fissures, but they do not cause them. And, there are some lessons to be learned from them:

Lesson #1. The climate bill has to be about reducing GHGs in the easiest, cheapest manner. It cannot be about revenue-raising, appeasing constituents, or “punishing” emitters.

Lesson #2. The Congress should consider taking a deliberative and iterative approach to GHG reductions. First, promote more efficiency; then increase the use of renewables. Third, set a reduction goal; and then building upon these actions take the time to develop the lowest cost, simplest ways to achieve that reduction goal.

Lesson #3. Instead of rushing (and failing) to put together Potemkin climate legislation in advance of the Copenhagen meetings, our national leaders should focus on getting an effective international agreement that includes all the countries of the world. Once that is done, the USA will know what it needs to do and know that other countries will be doing what is necessary.

Lesson #4. If President Obama and the Congress need to recognize that they cannot and ought not do everything at once. They need to set priorities.

I could be wrong. The Congress could still pass climate legislation this year. In which taking credit (instead of blame) becomes the main game. But I doubt it.

Supporters of Corn-Ethanol Reeling...

2009-06-04T06:53:00.000-07:00

When it comes to the core of environmentalism, there are no sacred cows. After years of support for corn ethanol, many environmentalists have "turned tail" on the corn farmers over land-use impacts.

Supporters of corn-based ethanol are reeling in response to federal climate change legislation that will punish carbon emitters, including the agriculture industry. They worry that policies like cap and trade and low carbon fuel will destroy their tenuous, taxpayer-subsidized market and lead to the corn ethanol industry being permanently put out to pasture. Most scientific data suggest they are well justified in their concerns... There are many outstanding, credible, scientific studies of the benefits of cellulosic ethanol over corn ethanol.

Here are a few more high-quality scientific studies:

http://www.sciencemag.org/cgi/content/abstract/319/5867/1238

Originally published in Science Express on 7 February 2008 Science 29 February 2008: Vol. 319. no. 5867, pp. 1238 - 1240 DOI: 10.1126/science.1151861 Reports Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change Timothy Searchinger, 1* Ralph Heimlich, 2 R. A. Houghton, 3 Fengxia Dong, 4 Amani Elobeid, 4 Jacinto Fabiosa, 4 Simla Tokgoz, 4 Dermot Hayes, 4 Tun-Hsiang Yu 4

Most prior studies have found that substituting biofuels for gasoline will reduce greenhouse gases because biofuels sequester carbon through the growth of the feedstock. These analyses have failed to count the carbon emissions that occur as farmers worldwide respond to higher prices and convert forest and grassland to new cropland to replace the grain (or cropland) diverted to biofuels. By using a worldwide agricultural model to estimate emissions from land-use change, we found that corn-based ethanol, instead of producing a 20% savings, nearly doubles greenhouse emissions over 30 years and increases greenhouse gases for 167 years. Biofuels from switchgrass, if grown on U.S. corn lands, increase emissions by 50%. This result raises concerns about large biofuel mandates and highlights the value of using waste products.

1 Woodrow Wilson School, Princeton University, Princeton, NJ 08544, USA. German Marshall Fund of the United States, Washington, DC 20009, USA. Georgetown Environmental Law and Policy Institute, Washington, DC 20001, USA.2 Agricultural Conservation Economics, Laurel, MD 20723, USA.3 Woods Hole Research Center, Falmouth, MA 02540–1644, USA.4 Center for Agricultural and Rural Development, Iowa State University, Ames, IA 50011, USA.

Corn-Based Ethanol Flunks Key Test
http://www.sciencemag.org/cgi/reprint/324/5927/587.pdf

Biofuel Researchers Prepare To Reap a New Harvest
http://www.sciencemag.org/cgi/reprint/315/5818/1488.pdf

Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change
http://www.sciencemag.org/cgi/reprint/319/5867/1238.pdf

On a macro level, the genesis of this government subsidy and preferential treatment program is but one of multi-thousands of examples of how government interference in the private market place has externalities rarely thought through at the time of group-euphoria and enactment. Regardless of what the lead California and Massachusetts politicians and their following say, cap and trade will have huge financial impacts on consumers and producers.

Your thoughtful, reasoned reactions are always welcome.

Three MGA Surprises and the Achilles Heel

2009-05-28T17:23:00.000-07:00

A couple weeks ago the Midwestern Greenhouse Gas Reduction Accord Advisory Group wrapped up its face-to-face meetings and submitted their cap and trade final draft design recommendations to the governors.

Candidly, this wrap-up surprised me in three ways. My first surprise was that they reached an agreement at all. It was only several months ago that I blogged that I didn’t think agreement was possible…so not only was I surprised but I was wrong. The Advisory Group did reach agreement. Five things forged this agreement: 1) creative compromises; 2) papering over differences of opinions by not forcing advisory group members to vote on the package or any of its sub-issues; 3) good facilitation; 4) belief from group members that “something should or will be done” about GHGs; and 5) most importantly, nearly everyone’s explicit understanding that the recommendations were more conceptual than a concrete implementation plan since their primary purpose was to influence the ongoing federal discussions.

My second surprise is that the agreement is not nearly as bad as it could have been. In fact, it offers some useful ideas, including:
1) More realistic GHGs reduction goals and timetables;
2) 90% of credits allocated to electric generators and 95% to industrial emitters at only a modest fee, with the fee and auction percentage phased in over the next 18 years;
3) Important cost containment mechanisms such as credit banking, early action crediting, and a mechanism to address credit price extremes and volatility; and
4) Use of carbon credit offsets.

These are very significant improvements over what the group had been discussing.

The very, very poor treatment of transportation fuels is my third surprise and a major disappointment. First, the Advisory Group recommends inclusion of transportation fuels under the cap despite evidence from their own modeling results showing such inclusion will do little to reduce greenhouse gas emissions.

The Advisory Group further recommends that the point where transportation fuels will be regulated under the cap program is “where the fuels enter the market in the participating jurisdictions; generally at the terminal rack, final blender, or distributor.” The problem with using this as the point-of-regulation is that nearly all of the greenhouse gas emissions from transportation fuels occur when the fuel is combusted in the consumers’ cars and trucks, not at the terminal rack, final blender, or distributor. Thus, and perhaps more to the point, the operator of the terminal rack, final blender, or distributor has no way to reduce the fuel’s greenhouse gas emissions, other than to reduce the amount sold. This means either fuel gets rationed or the cost of buying the emissions credits is directly passed through to consumers with no reduction in emissions.

But the unkindest cut is that the Advisory Group recommends that those who it deems responsible for greenhouse gas emissions from transportation fuels must obtain emission credits for 100% of their emissions through an auction. As I just mentioned, this is very different from how the group deals with the electricity sector.

Treating transportation fuels like this is unfair, unreasonable and inappropriate and worse will not reduce greenhouse gas emissions while increasing the costs to consumers. For example, economic analysis provided to the Advisory Group by their facilitators concludes that “the price of gasoline and diesel are expected to increase by 9 and 10 cents per gallon, respectively, for each $10 per metric ton of CO2e increase in the carbon price, assuming 100 percent cost pass through.” (See page 13 of Insights from Prior Climate Policy Modeling Analyses, dated May 4, 2009.) Such cost increases for little or no gain cannot be what the Governors want and should be rejected. It is the recommendations’ Achilles heel.

The "Money" in Cap and Trade

2009-05-28T06:41:00.000-07:00

I apologize, in advance, for being so stuck on "the money" generated by the favored solution to greenhouse gas amelioration---cap and trade. But being both a curmudgeon and having a strong intellectual proclivity against what the sheep think, climate change legislation will generate "green jobs." The problem is the majority of those jobs will be on Wall Street in the next bogus derivative market---carbon credits. Not only will this "solution" create many more public financial problems than the bogus housing finance scheme the market invented in the 1990s, but it will not reduce greenhouse gases.

If, and this is a big "IF", the House passes the Waxman-Markey cap and trade bill and the Senate passes something and they are able to reconcile their differences in conference committee, I predict that there will be so many free credits to favored industries (to get the votes), that the end result will be lots of rich investors (big corporations, a plethora of Congress-people, environmentalists, and of course, Wall Street). What a collection of characters! It inspires fear and reasons for Americans to strongly oppose cap and trade.

Did I mention that since the petroleum industry is not a favored industry, look for higher and higher gas prices at the pump! That is certain to help Minnesota families, generally, during this terrible recession and the recreation market in greater Minnesota more specifically. Have a great summer (sarcasm added)!

POINT CARBON
Carbon market doubled in 2008: World Bank http://www.pointcarbon.com/news/1.1126224
Published: 27 May 2009 10:26 CET
"The value of the carbon market doubled in 2008 to $126 billion (€86bn), the World Bank said.
The total volume of trade rose 61 percent to 4.8 billion tonnes of carbon dioxide equivalent (CO2e), compared to 3.0 billion tonnes in 2007, a report by the bank revealed today."

With near unanimity, United States Supreme Court strikes down government’s attempt to broaden CERCLA liability

2009-05-19T11:26:00.000-07:00

Generally speaking, an entity who “arrange[s] for disposal” of a hazardous substance at a contaminated facility can be held liable for cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). It has long been understood that this provision clearly (a) covers an entity who enters into a transaction to solely discard a used and no longer useful hazardous substance, and (b) does not cover an entity who enters into a transaction solely to sell a new and useful hazardous substance that may later be disposed of by a third party. But in a recent case, EPA argued that Shell Oil should be subject to “arranger” liability for its sale of a hazardous chemical to a distributor because Shell had knowledge of leaking and spilling during the transaction, which EPA argued fell within the statutory definition of “disposal.”

In what seems like a rare showing of consensus these days at the Supreme Court, an 8-justice majority in Burlington Northern & Santa Fe Ry. Co. v. United States rejected this broad reading as beyond the bounds of the statutory language (the decision also addresses the named railroads were properly held to be joint and several liability; the Court ruled they were not). Specifically, the Court, applying an ordinary meaning of “arrange for,” ruled that there can be no liability as an “arrange[r] for disposal” unless it was the entity’s intent that the transaction involve, at least in part, the disposal (spilling and leaking in this case) of the substance. Thus, while Shell was aware that leaks and spills occurred when its chemicals were being transferred from the common carrier to the buyer, more was needed to impose “arranger” liability under CERCLA.

In contrast to a finding of intent, Shell encouraged the distributor to reduce spills by providing safety manuals, offering a discount for improvements in safety procedures, and requiring inspections by engineers. Although minor spills continued to incur, the Court held that such evidence showed that Shell intended to reduce spills and not intended for them to occur. Without that conscious desire that the useful substance be spilled or leaked during transport, it was beyond the common understanding of “arrange for disposal” to impose liability on Shell.

In reality, the Supreme Court’s decision is remarkable only for its common sense. The decision is based on a straightforward, ordinary understanding of what it means to arrange to dispose of a product. Of course, intent is still a subjective determination that is fact intensive. But at least we now know that if you, like Shell, take active steps to avoid spilling and leaking of a substance you are trying to sell, you are not arranging for disposal of the very chemical you are selling.

Submitted by Michael J. Mergens and Julie Nagorski

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.

Julie Nagorski is an associate attorney at Larkin Hoffman and practices in the areas of real estate and land use law. In her practice, Julie combines knowledge of the related disciplines of land use and real estate with expertise in litigation, dispute resolution, and appellate advocacy.

Legislature balks on common-sense energy policy

2009-05-15T08:40:00.000-07:00

The 2009 Legislature is poised for adjournment, and another session will likely end with another disappointment on energy policy – specifically when it comes to preparing Minnesota for future base-load electricity needs. Earlier in the session, the Minnesota Senate had voted 42-24 to remove the ban on additional nuclear power in this state; the House, however, rejected the measure 60-72. The conference committee, which finished its deliberations May 13, chose not adopt the ban in its report.

This means 102 legislators voted to repeal the gag rule that prevents regulators from talking about nuclear energy. It begs the obvious question: Why won’t the other 96 lawmakers even let us seriously consider additional nuclear power as an option? Translated, that means Minnesota's base-load energy policy is 'just say no.”

Furthermore, the conference committee report on the omnibus energy bill does nothing to make Minnesota’s electric costs more competitive, which is an important element of growing our economy in the future.

It’s disappointing that the Legislature has rejected the conclusion that a majority of Minnesota legislators, Governor Pawlenty, and most Minnesotans have reached – namely, that Minnesota should have all options on the table when it comes to meeting our future power needs.

Congressional Hearings on C&T Speculators

2009-05-12T11:19:00.000-07:00

I am such a visionary. It turns out that some politicians are waking up to the fact that the much touted cap and trade solution to controlling greenhouse gases is really about the money, not the environment. Imagine that! Who, but a curmudgeon like me, would have thought that all those swell, well-meaning Al Gorites were really interested in creating an issue the solution to which made them billions. Sounds like "affordable housing" for all, the preface to the subprime debacle.

I would cordially invite you to visit my earlier blogs on these matters. The reason market capitalism is the greatest economic system the world has ever seen is that it permits people to be creative, sometimes too creative for the collective good. But maybe the collective good is human speak for what is best for "me."

Legislation & Policy Ernst and Young
Finance Committee Cap-and-Trade Hearing Focuses on Speculators

The Senate Finance Committee hearing on May 7, 2009, on "Auctioning Under Cap and Trade: Design, Participation, and Distribution of Revenues" focused heavily on the potential for speculators to manipulate the price of emissions allowances. In an opening statement, ranking Republican Charles Grassley (R-IA) said one troubling aspect of potential climate change legislation is that speculators "are foaming at the mouth to get at cap-and-trade profits," and hedge funds and private equity funds have been lobbying for a system to be put in effect. He later said Congress needs to keep in mind the public outrage over the price of gas, grains, foods, and alternative energy like biofuels, all of which have been the subject of manipulation by speculators.

"Some of us are going to be very careful about enhancing the role of speculators in this whole process of solving global warming," Grassley said. Similarly, Chairman Max Baucus (D-MT) said talk of auctioning allowances raises concerns about Wall Street wanting to manipulate prices, and asked how auctions could be monitored, what manipulation may or may not have occurred in existing auctions, and what manipulation may occur in a cap-and-trade auction.

Alan Krueger, Assistant Treasury Secretary for Economic Policy-Designate, said enforcement agencies have played a role in monitoring existing treasury auctions. Design features of an auction can have influence on its susceptibility to manipulation and there are ways of designing an auction to minimize manipulation and price volatility, he said.

Later, in response to a similar question from Sen. Bill Nelson (D-FL), Krueger said flexibility in the availability of allowances over time is one way of reducing the ability of speculators to manipulate prices. Krueger said one design issue is how long allowances can last, because a temporary shortfall could create a temporary opportunity to exploit limited supply. Allowing banking and borrowing of allowances over some period of time could limit the role of speculators, he said.

Sen. Maria Cantwell (D-WA) noted that Credit Suisse last November announced it had begun securitizing carbon deals in which bundled credits for 25 offset projects were into three tranches and sold to investors. "To me that sounds a lot like what we just did with the mortgage-backed securities that were at the heart of our meltdown," Cantwell said. She asked what lessons can be learned from the trading experience in Europe. Jos Delbeke, Deputy Director-General of the European Commission Directorate-General for the Environment, said liquidity of the market is very important, and prices in the European system have been relatively stable with normal fluctuations.

Krueger otherwise said, in response to a question from Chairman Baucus, that treasury is qualified to play a role in a cap-and-trade allowance auction because the agency has a tremendous amount of expertise and experience in auctioning and is willing to work with whatever agency is made responsible. Further, the auction theory branch of economics is quite well-developed, he said. "Treasury recognizes the critical importance of maintaining the integrity of, and ensuring investor confidence in, the market for its debt securities, including the proper dissemination of price and yield information," he said in written testimony.

Carbon Tax vs. Cap-and-Trade

The second major focus of the hearing was a carbon tax versus a cap-and-trade system. Sen. Grassley asked which provides more certainty for consumers and businesses, and which is more efficient. Krueger said a cap-and-trade system offers more certainty in curbing carbon emissions because of the certainty involved in the cap, and also offers much more flexibility. Douglas Elmendorf, Director, Congressional Budget Office, said a carbon tax is more efficient in terms of the timing of emissions reductions and because it reduces the volatility of the price of emissions, but there is less certainty in gauging the amount of emissions reduction at a given point in time.

Anne Smith, Vice President, Practice Leader of Climate & Sustainability, CRA International, said a carbon tax is more efficient than a carbon cap, though hybrid schemes to put price ceilings on top of a cap-and-trade system could move such a system closer to the efficiencies of a tax. On the subject of whether to auction emissions allowances or give them away, Smith said a cap-and-trade program with 100% auction of allowances would actually function much like any other cap-and-trade program that relies on free allocations: In the absence of any auction, if all the allowances are allocated to parties with compliance requirements, an allowance market forms naturally.

Member and witness statements from the hearing

For all of it's murk, cap and trade is about the money not greenhouse gases. Yogi was right. It is deja vu all over again.

The Economy & Cap-and-Trade

2009-05-09T10:00:00.000-07:00

An article in the Christian Science Monitor last week asked the question “Is a bad economy good for the environment?”

The article was prompted by the fact that the global economic downturn will likely result in a decrease in greenhouse gas emissions. Energy use and economic growth move together. A growing economy uses more energy, a contracting one less. With current technology and energy sources, greenhouse gases rise and fall accordingly.

The article cites an estimate that European emissions could be 7 percent less than predicted by 2020 due to the recession. U.S. oil consumption is down 7 percent. However, some aren’t impressed by these reductions.

“It’s not a blockbuster impact,” adds Frank O’Donnell, president of Clean Air Watch. “You would have to have a screaming downturn and no manufacturing at all to change that [worldwide greenhouse-gas emissions] in a huge, measurable way.”

If the worst economy since the Great Depression isn't making drastic enough cuts, it's frightening to imagine what it would take. While not many supporters of cap-and-trade would openly admit that they are enjoying the environmental "benefits" of the economic downturn, it appears they would happily see "no manufacturing at all" in the United States, in the name of reduced carbon emissions. There is no other explanation for their support of regulations that will simply drive manufacturing to other countries, like China, where they will do more harm to the global environment.

Ironically, while "environmentalists" tally the reductions resulting from our declining GDP, one country's GDP continues to rise, along with their carbon emissions. While the U.S. economy continues to contract, China's GDP rose at an astonishing 9% in 2008.

So in the end, will cap-and-trade simply send our jobs, emissions and wealth overseas?

To read the article, go to: http://features.csmonitor.com/environment/2009/04/27/is-a-bad-economy-good-for-the-environment/

Cap & Trade for Body Fat?

2009-05-07T18:21:00.000-07:00

I was spinning at the gym the other day reading an article in The New York Times about a British study on body fat and climate change (see below). Obviously, my annual six-week springtime ritual to lose weight, get into better shape, and buff my beer-keg belly into six-pack abs (note to self: stop thinking in beer metaphors!) has climate implications.

As I moved to the weight machines I had an epiphany: if cap and trade is the tool of choice to reduce everyone’s global greenhouse gas emissions, why not use it to reduce everyone’s body fat? Both body fat and GHGs are rising, threatening our well-being and causing leading scientists and medical doctors to tell us to reduce them.

How would a Body Fat Cap and Trade (BFCT for short) work, I pondered during my reps of medicine ball crunches? Just like a GHGs cap-and-trade program:

• Set a scientifically established national target on aggregate body fat and then reduce the target over time, say an 80% reduction of the nation’s body fat by 2050.

• Divvy the allowable body fat credits to the various sectors of the country based on their respective share of the body fat total.

• Auction off the body fat credits so that all those possessing body fat pay money (directly or indirectly) to the government for their body fat so as to:
o Send market signals of the true societal, environmental and health costs of body fat;
o Offer incentives to reduce our body fat; and most importantly
o Raise money to fund body fat reducing programs. For example, my gym membership would be paid for…what a great result for the YMCA and me! Billions could go to body fat reducing medical research and development. Low income people with high body fat who can’t afford their body fat credits would get financial help.

• Establish a body fat trading market so those who exceed their body fat credits could get more credits from those who reduced their body fat. I’m sure a secondary market of body fat credits would develop as fitness experts and dieticians helped people reduce their body fat to get saleable credits. I certainly would stop my post-workout habit of having a Peanut Buster Parfait if I could sell my body fat credits.

• Establish body fat offset criteria so that people could get body fat credit by helping others avoid increasing their body fat.

• Establish “early loser” credits so the new program does not penalize those of us already working out.

Clearly, like in a GHGs cap-and-trade program, a body fat cap-and-trade program has to resolve a lot of difficult issues like:
1. How to deal with growth…more people means more body fat…
2. How to handle new body fat entrants?
3. How to deal with direct and indirect body fat increases?
4. What is the body fat point of regulation? Clearly it should be the individual, but that’s so direct so I bet we’d avoid that like we’re doing with GHGs from the transportation sector, so we’d have to find some ineffective, indirect body fat surrogate whose only impact would be to raise the cost of food.
5. How to fairly account for historic regional body fat differences?
6. What if a country with growing body fat doesn’t participate in the program?
7. How do we assure compliance?
8. What are the body fat enforcement mechanisms?

Certainly these are difficult issues, but if they can be resolved for a GHGs cap-and-trade program, they can be resolved for body fat.

Think about how much money the government would raise and what they could do with it? Imagine all the body fat reducing jobs that would be created; they would probably exceed the number of promised green jobs. This could unite the President’s health care reform, climate change, and budget initiatives.

Clearly, I’m not serious about this “body fat cap and trade” idea. It must stem from exercise-induced endorphins. But, the potential parallels of body fat and GHGs cap-and-trade programs are eerie. And, it was fun to think about it as I was pushing myself through the five-minute barrier on the Elliptical.

The New York Times
April 27, 2009
Green Inc. Column
Climate Research That Might Not Help
By TOM ZELLER Jr.

Phil Edwards, a statistician and the head of the Nutrition and Public Health Intervention Research Unit at the London School of Hygiene & Tropical Medicine, told me last week that he was receiving a lot of hate mail.

“I got a lot of nasty stuff from your side of the globe,” he said.

The reason for the opprobrium is this: “Population Adiposity and Climate Change.” That’s the title of a paper that Mr. Edwards and a colleague, Ian Roberts, published this month in the International Journal of Epidemiology.

For those unsure of the term “adiposity,” just think “body fat.”

Yes, Mr. Edwards and Mr. Roberts published a statistical model (not the first of its kind, Mr. Edwards was eager to point out) that examined the relationship between increasing rates of obesity and climate change.

“What a stupid correlation,” wrote one reader at our Green Inc. blog, where we took note of the research last Wednesday. “This study is yet another confirmation of our fat-phobic society.”

“I would like to see a fat tax,” wrote another. “I am sick of paying for these big medical bills because someone wants to eat everything in sight.”

And from a reader identified as Hentrain: “Tall people are also using up more of our precious resources than short people are, and men consume more calories than women. We should strive for an all-female society of tiny, thin vegetarians.”

To be sure, the study touched a nerve — not least, one might reckon, because so much of the Western world is getting fatter. It is no secret, for instance, that more than 30 percent of adults in the United States have a body mass index, or B.M.I., of 30 or higher — the clinical definition of obesity. In Britain, about a quarter of the population qualifies. Same for Canada.

And the burden of all this extra weight — on individual health and on the health care resources of society — is indisputable.

But in a world hard-pressed to find priorities in the battle to curb greenhouse gas emissions, a reasonable response to Mr. Roberts’s and Mr. Edwards’s mathematical exercise, however accurate, might be: so what?

It is hard, admittedly, to argue with their findings. Taking two hypothetical populations of one billion people each — one with a 3 percent obesity rate (roughly the rate in Britain during the 1970s) and the other with a 40 percent obesity rate (as Britain’s is estimated to be by 2010) — the researchers simply did some modeling.

Food production, for instance, accounts for a substantial amount of the globe’s greenhouse gases — 20 percent from animal agriculture alone (read: meat and dairy), according to the United Nation’s Food and Agriculture Organization. Using this metric, along with established formulas for calculating the food energy needed to maintain a certain B.M.I., and a typical level of daily activity (sleep, office work, driving, and so forth) the researchers reckoned that the heavier of their two populations would require 19 percent more food energy than the slimmer one.

They also crunched some transport data, including the energy-use differential between a Ford Galaxy (assigned to their larger population) and the smaller Ford Fiesta (for the trimmer folks), as well as the added energy needed to move big bodies around in general, whether walking, driving or flying.

All told, the study concluded, the increased body size of the larger population accounted for between 0.4 and 1.0 gigatons of additional carbon dioxide equivalents per year. (For scale, global greenhouse gas emissions for 2000 were estimated to be roughly 42 giga-tons of CO2 equivalent.)

Among their conclusions: “The maintenance of a healthy B.M.I. has important environmental benefits in terms of lower GHG emissions,” they wrote, referring to greenhouse gas emissions.

It is a fairly straightforward point, and one that, according to Mr. Edwards, many of his angry correspondents were taking a little too personally.

“I just think it’s important that we all realize that we’re all gaining weight, which isn’t good for us,” said Mr. Edwards, who admitted in a phone call last week that he would consider himself overweight. “And if food production is an antecedent of climate change,” he said, “then we’re also harming the planet.”

That would seem to be true as far as it goes. But Brenda Ekwurzel, a climate scientist with the Union of Concerned Scientists, an advocacy group in Washington that researches energy and climate issues, cautioned that while a global focus on carbon footprints was a good thing, “we need to keep a focus on the big stuff.”

In an e-mail message, Ms. Ekwurzel, who quibbled a bit with the methodology of Mr. Edwards’s paper, suggested that, even allowing for its conclusions, preventing obesity rates from increasing ought not be considered a priority for cutting emissions — for individuals or policy makers.

“For most Americans, the most effective way to reduce one’s carbon footprint is to drive less, use more energy-efficient appliances and less electricity and reduce the amount of fossil-fuel energy intensive food you consume,” Ms. Ekwurzel said. “At the policy level, we need to concentrate on cleaner cars, cleaner fuels, smarter growth, cleaner, more efficient electricity and preventing tropical forests from being destroyed — not people’s waistlines.”

She added that, given the potential for expanded heat waves, increased smog, migrating pathogens and other ills associated with a warming planet, “It’s more important to focus on the effects global warming has on our bodies, rather than the effects that our bodies have on global warming emissions.”

For his part, Mr. Edwards said that he and his colleague never offered their analysis as a remedy for climate change — though he suggested that, under the circumstances, every little bit helps. “I’d hope that we’re not competing for ideas or solutions,” he said.

Nor, he added, should anyone interpret the paper — an academic exercise meant to highlight an interrelationship — as assigning blame to any particular individual.

“Population fatness is an environmental problem,” Mr. Edwards said, “But someone who has a B.M.I. over 30 is not somehow more to blame for global warming.”

If that was indeed the message of the paper, not everyone received it.

Wrote a commenter at Green Inc.: “The environmentally sensitive and rather rotund Al Gore should take note.”

A Case for Free Carbon Allowances

2009-04-30T19:28:00.000-07:00

The notion that carbon credits need to be auctioned-off is counterproductive to the effort to reduce greenhouse gas emissions (GHGs). A free allowance system will produce a more acceptable, more efficient, cheaper and deeper GHGs reductions quicker.

Do you remember the childhood story of Stone Soup? The story is reproduced below. To extrapolate, it is a story of how a community will perform a collectively beneficial act if it is approached in a gradual non-threatening way. There is no doubt that a carbon constraining regime will be like the weary soldiers in the story: an uncertain threat to the community. That threat is both economic and philosophical and no one knows how the villagers will react. I fear an auction will play out negatively. By contrast, allocating allowances for free poses little threat allowing the villagers to gradually adjust to the carbon-constraints and then contribute as they can, because they want to…not because they have to. Why risk the policy equivalent of organ rejection? In the end, policymakers and politicians would rather be eating the community-developed soup, than wearing it.

I reject the premise espoused by auction advocates that evil “windfalls” might occur if carbon allowances are given away for free. In fact, I embrace that concept…it is what will spur carbon reductions. The best way to reduce GHGs is to allow people to make money doing it. The financial incentive to cash in on GHGs reductions will inspire tremendous innovation since every emitter (and consultant and inventor) will be thinking about how they can make money so the only windfall will be in the gold rush of GHGs reductions.

Following on this thought, a free allowance approach will result in quicker and deeper GHGs reductions than an auction approach. Under either an auction or free allowance approach there will be a rush of immediate reductions. However, the rush will peter out in the auction setting as the market (or non-market market as I called it last week) begins to settle in and everyone adjusts to the new carbon costs. They will either absorb the costs or pass them along as a cost of doing business like they do with inflation or increased health care costs. Thus, the pressure to further reduce GHGs will come only from the declining cap. But in the free allowance world, every GHGs reduction becomes revenue, and since making money is a stronger incentive than reducing costs (which is why energy efficiency is such a hard sell) the free allowance system and its money-making aspects will lead to greater reductions sooner, deeper and cheaper than the auction system.

The auction approach will inevitably increase energy costs. By contrast, free allowances will not increase costs very much, if at all. There would be no upfront costs and the costs of reducing the emissions, even to meet a declining cap, would be only the cost of the delta of the initial free allocation and the subsequent allocation…a much smaller cost than if they were allocated by auction.

If GHGs allowances were given away for free we wouldn’t have to figure out who is in or out of the program…everyone could be in. This means we can get a GHGs-reducing system up and running quickly. It may not be a perfect system but it could be a good one and then improved over time. Allocating allowances in any other way triggers complicated and politically-driven machinations that cause delay and weakens the final program. It will create undeserving losers and undeserving winners, either economically or from a business position. We should not let perfection be the enemy of the good.

I have already debunked the “anti-windfall” rationale for an auction. There are two other arguments that auction advocates make in favor of that approach. One is to set a carbon price. While there is some merit to this argument, it is not as strong as the advocates would have you believe. Things get priced in the marketplace all the time without an auction…generally cost plus profit. For carbon it doesn’t matter what the starting price is…we could draw a price out of a hat and announce it as the opening market cost…by days end the sellers and buyers would do what they do every day on the New York Stock Exchange or the local Target: haggle until market-clearing price is established. In the alternative, the government could allocate 98% of the carbon credits for free and then auction off the remaining 2% to set a market price. The money could go to the entity running the carbon market to audit an expansive offset program.

This leads me to the second reason advocates argue for an auction: to raise revenue. This is both a bad and wrong reason. Increasing the cost of energy so that money can be raised to offset those increased costs is ridiculous. It is also inherently unfair, since clearly not everyone adversely affected by the higher costs can be made whole. Nor should the revenue be used to subsidize non-GHG emitting technologies. Such subsidies will inherently stymie market-driven innovation.

In sum, instead of pursing a carbon auction, policy makers should pursue a free allowance approach since it is much more likely to yield a carbon-reducing program sooner that will actually get GHGs reductions in the most sustainable, efficient and least costly way.

The Story of Stone Soup
http://www.stonesoupfolkcircle.com/stonesoup_story.html
A fable which was written down by Marcia Brown in 1947; the story exists in many variations throughout the world. This one is said to be an old French story (sometimes it is said to be Russian), and is therefore not copyrighted.

Three soldiers trudged down a road in a strange country. They were on their way home from the wars. Besides being tired, they were hungry. In fact, they had eaten nothing for two days.

"How I would like a good dinner tonight," said the first. "And a bed to sleep in," added the second. "But that is impossible," said the third.

On they marched, until suddenly, ahead of them, they saw the lights of a village. "Maybe we'll find a bite to eat and a bed to sleep in," they thought.

Now the peasants of the place feared strangers. When they heard that three soldiers were coming down the road, they talked among themselves. "Here come three soldiers," they said. "Soldiers are always hungry. But we have so little for ourselves." And they hurried to hide their food. They hid the barley in hay lofts, carrots under quilts, and buckets of milk down the wells. They hid all they had to eat. Then they waited.

The soldiers stopped at the first house. "Good evening to you," they said. "Could you spare a bit of food for three hungry soldiers?" "We have no food for ourselves," the residents lied. "It has been a poor harvest."

The soldiers went to the next house. "Could you spare a bit of food?" they asked. "And do you have a corner where we could sleep for the night?" "Oh, no," the man said. "We gave all we could spare to the soldiers who came before you." "And our beds are full," lied the woman.

At each house, the response was the same -- no one had food or a place for the soldiers to stay. The peasants had very good reasons, like feeding the sick and children. The villagers stood in the street and sighed. They looked as hungry as they could.

The soldiers talked together. The first soldier called out, "Good people! We are three hungry soldiers in a strange land. We have asked you for food and you have no food. Well, we will have to make stone soup." The peasants stared.

The soldiers asked for a big iron pot, water to fill it, and a fire to heat it. "And now, if you please, three round smooth stones." The soldiers dropped the stones into the pot.

"Any soup needs salt and pepper," the first soldier said, so children ran to fetch salt and pepper.

"Stones make good soup, but carrots would make it so much better," the second soldier added. One woman said, "Why, I think I have a carrot or two!" She ran to get the carrots.

"A good stone soup should have some cabbage, but no use asking for what we don't have!" said the third soldier. Another woman said, "I think I can probably find some cabbage," and off she scurried.

"If only we had a bit of beef and some potatoes, this soup would be fit for a rich man's table." The peasants thought it over, then ran to fetch what they had hidden in their cellars. A rich man's soup, and all from a few stones! It seemed like magic!

The soldiers said, "If only we had a bit of barley and some milk, this soup would be fit for a king!" And so the peasants managed to retrieve some barley and milk.

"The soup is ready," said the cooks, "and all will taste it, but first we need to set the tables." Tables and torches were set up in the square, and all sat down to eat. Some of the peasants said, "Such a great soup would be better with bread and cider," so they brought forth the last two items and the banquet was enjoyed by all. Never had there been such a feast. Never had the peasants tasted such delicious soup, and all made from stones! They ate and drank and danced well into the night.

In the morning, the villagers gathered to say goodbye. "Many thanks to you," the people said, "for we shall never go hungry now that you have taught us how to make soup from stones."

See also http://en.wikipedia.org/wiki/Stone_soup ... for a discussion of the history of The Story of Stone Soup.

The Cost of Cap-and-Trade

2009-04-24T11:32:00.000-07:00

On Tuesday, the House Energy & Commerce Committee began hearing testimony on the Congress's newest attempt to deepen the recession -- the Waxman-Markey energy and climate change legislation, which would establish a federal cap-and-trade program.

As we have discussed here previously, this Administration has estimated that a cap-and-trade program could generate over $646 billion for the federal government over the next ten years (some Administration officials have said that number could go as high as $2 trillion). All that money has to come from somewhere -- our pockets.

So what does that mean for the average consumer? A number of government agencies and non-government actors have been trying to sort that out. Estimates for the cost of a federal cap-and-trade program have been consistently burdensome on the average family.

• The Congressional Budget Office estimated that a 15 percent cut in CO2 emissions could cost the average household roughly $1,600 (in 2006 dollars)
http://www.cbo.gov/ftpdocs/100xx/doc10018/03-12-ClimateChange_Testimony.1.1.shtml

• EPA estimated that the Lieberman-Warner cap-and-trade bill would decrease household consumption by $1,375 in 2030 http://www.epa.gov/climatechange/downloads/s2191_EPA_Analysis.pdf

• The National Association of Manufacturers found that nationally household disposable income could decrease between $4,022 to $6,752 by 2030 under a cap-and-trade program
http://www.accf.org/media/dynamic/1/media_191.pdf

The President’s budget would give some of the money raised by the cap-and-trade program back to consumers through a tax credit. However, it is only $800 for families earning less than $150,000 per year. This is roughly half of the lowest projection above, so the tax cut would be wiped away by a new energy tax.

It should be no surprise, then, that this week, the President's "new and improved" EPA came out with a quick analysis of the Waxman-Markey proposal. EPA concluded it would cost consumers less than $150 per year, significantly less than just about every other economic analysis of the impact of a cap-and-trade program.
http://www.epa.gov/climatechange/economics/pdfs/WM-Analysis.pdf

One of the ways it accomplishes this feat is by assuming that the "bulk of the revenues" will be returned to consumers through the President's tax credit. Failure to do so, EPA says, would result in "substantially larger losses in consumption." So EPA's estimate relies on the assumption that once the government gets our money, it will be sure to give it back to us. Considering the amount of red ink in Washington, how many of you believe we'll see the "bulk" of that money again?

Also, we should take note that this analysis did not include the cost of the renewable energy and energy efficiency mandates in Waxman-Markey. EPA also cites a number of other uncertainties that could affect the economic impacts, including the availability of international offsets. In light of the number of issues not evaluated by EPA in its haste to get these numbers out for Earth Day, I will not be shocked when other agencies and groups find that the costs are expected to be much higher.

The Proposed Carbon Market: A Non-Market Market

2009-04-23T19:05:00.000-07:00

I was standing in the checkout line at my local Kowalski’s Market and asked myself if this is what a carbon market would look like? While the grocery market has lots of fine foods for me to select from, they set the price, no haggling or negotiation. If, after physically examining the product, I like it, I can buy it at their price. Candidly, this is the way I buy most things: stuff from Target, gasoline, meals at Chipotle, etc. Sellers set the price and I decide to buy it if I think it’s a good value.

Ever explored eBay? You can get just about everything and anything there. It’s a different type of market than Kowalski’s. Sellers offer their goods and buyers buy them, either at an offered price or some mutually agreed price between the seller and buyer. I pick up unique floaty pens to expand my collection (see www.floaty.com).

Over the years, I’ve invested in the stock market. A market different from Kowalski’s and eBay…enough said.

So, what would a carbon market look like? Would it be like Kowalski’s where I was a price taker but could directly assess the value of the item I was buying? Or, would it be like eBay where the product would be more uncertain but I might find a price that met the value I placed on the product? Or, would it be like the stock market where too many people have no idea how to value things or what the “market” is doing, yet participate anyway.

But I’ve gotten ahead of myself. For there to be markets there needs to be sellers of something that would-be buyers value. No sellers, no market; no valued-product, no market; no buyers, no market. Therefore, for there to be a carbon market there needs to be sellers of carbon, the carbon needs to be of value to potential buyers, and there needs to be those buyers. As of yet, these elements are just beginning…but people are trying, like the European Union, the Chicago Climate Exchange and the members of the RGGI.

Economists love markets, believing they are the best way to set the value for a product, as well as providing incentives for positive behavior (reducing GHGs) and disincentives for undesirable behavior (emitting GHGs). I share the economists’ love for markets and actually believe that there should be a GHG-reducing market, but as I have already established there are many variations of markets, each having their own set of strengths and weaknesses depending on how they are designed.

This is why I am concerned about the designs for the proposed carbon market. It appears the “market” design has the seller being the government, their product being credits for GHGs which has value because the government “owns” all the GHGs credits requiring would-be emitters to purchase the GHGs credits. Additional twists to this proposed market design are that emitters have no choice but to purchase the credits since at least in the near term they either pay or go out of business. And, the price they pay is set by an unpredictable auction. Finally, the only entity to benefit financially is the government. It’s as if when I get my milk at Kowalski’s, the store took my clothes and made me buy them back or risk citation for indecent exposure. This may make them money since I need to buy milk. It may also prevent me from wearing too many clothes when I go to the grocery store (a thought that should scare you very much!) but it doesn’t sound like a very efficient or effective market. In fact, it doesn’t sound like a market at all....it’s just a way to make money off my clothes.

Instead of creating this non-market market, a true carbon market should be created. Cap emissions, decline the cap over time, then let carbon buyers and sellers use markets like Kowalski’s, eBay or the NASDAQ to value the ability of reducing GHGs. Let these buyers and sellers get the benefit of the exchange, not the government. The government should need nothing more than the satisfaction of the reduced GHGs. This is how I buy my milk at Kowalski’s, how I expand my floaty pen collection using eBay, and how I invest in mutual funds. It’s how a real carbon market should work.

Priorities Matter...New Research: Aerosols are Back: Black Carbon and Other Short-Term Pollutants Matter

2009-04-22T08:45:00.000-07:00

Last week in NATURE GEOSCIENCES, NASA Climate Modeler Drew Shindell published “Climate Change Cool Ozone” research modeling global warming over the past half century and concluded that aerosols are responsible for half or more of the warming in the Arctic!

He and other scientists say that reducing emissions of black carbon and other short-lived pollutants that contribute to global warming could buy the world crucial time while governments begin the slow overhaul of global energy systems that will be required to reduce emissions of CO2, which comprise 77% of all greenhouse gas emissions.

He also makes a very logical, compelling and understandable argument on anthropogenic global warming.

“The large-scale vertical structure of temperature change in the atmosphere is an important characteristic of the forces driving climate change. Increases in greenhouse gases cause warming in the troposphere but cool the stratosphere. Greater output from the sun similarly warms the troposphere, but causes even greater warming in the stratosphere. Observations show that the troposphere has warmed in recent decades whereas the stratosphere has cooled markedly; this is clear evidence for anthropogenic warming rather than natural warming from the sun.”

In a speech given last week, Secretary of State Hillary Clinton made the following statement:

“Short-term carbon forcers like methane, black carbon, and tropospheric ozone contribute significantly to the warming of the Arctic. Because they are short-lived, they also give us an opportunity to make rapid progress if we limit them.”

For a copy of the complete article:
http://www.nature.com/ngeo/journal/v1/n2/pdf/ngeo115.pdf

An Overheard Conversation On Climate

2009-04-16T19:59:00.000-07:00

I was at a coffee shop the other day catching up with an old friend. At a table nearby were some twenty-somethings, obviously old friends themselves, talking about their jobs, careers, politics, and loves. I didn’t pay any attention to them and certainly didn’t want to eavesdrop nor allow their conversation to interfere with my own. Yet, when the topic of climate change came up I couldn’t help but catch snippets.

It started when one said, “Can you believe that Obama’s science advisor says that we should think about shooting particles into the atmosphere to prevent global warming? That’s the dumbest thing I’ve ever heard.”

And, another responded, “Yeah it seems dumb, but the climate change threat is real. Everything’s melting: the polar ice caps, glaciers and lake ice up by Bayfield, everything so we had better do something or we’ll be in a world of hurt and if that’s what it takes then let’s try.”

“You can’t be serious! Yes, the threat is real, but that’s no answer. That’s giving up. We can stop it by eliminating greenhouse gas emissions, using more renewables, efficiency and stuff like that. Obama is already working on plan,” said another.

“Do you really believe it’s a threat?”

“Yes I do. Most scientists do too. Sure, there are uncertainties from the unknowns and unknowable nature of such a complex thing as global climate. But it just makes sense that when you emit a lot of stuff it eventually builds up.”

“I’m not so sure.”

“Even if it’s real, do you think it will be as bad as all that?”

“Not sure, but it seems every news story says we're beyond the tipping point and that we need radical action to prevent a catastrophe.”

“No, seriously, do you really think we’re at a climate tipping point?”

“Do you think that’s possible?”

“Who knows for sure if we’re at a tipping point or not. Maybe we are; maybe we aren’t. I hope we’re not.”

“And, if we are at or beyond the tipping point?”

“All this tipping point stuff is talk from the radical environmentalists wanting to scare people into action. But I think it’s back firing…”

“If we’re tipping, forget about stopping emissions, we should spend our time figuring out how to mitigate the affects and fast.”

“We’re doomed. No more polar bears; starvation; wars over water; It’ll be Mad Max stuff. I’m going to be rich because I’m going to plant corn up in Hudson Bay.”

“Come on. We’re having a serious conversation here.”

“Real or not, I’ll tell you I have no confidence in the Obama plan.”

“Yeah, it seems too little too late.”

“I’m excited about the Obama plan…it means lots of money for renewables and I want to get a piece of that action.”

“Nice: we’re doomed and all you can think about is yourself. We’ve already ruined the planet; the planet’s warming and there’s nothing we can do to stop it. So, I’m glad the Obama-guy is thinking about that kind of stuff. It’s the only thing that might save us.”

“No way! Even if it was a good plan, other countries like China won’t take any action…so it doesn’t matter what we do. So why should we take that pain if no one else will?”

“It doesn’t have to be painful. If we do it right…and I’m not saying Obama is doing it right…but I am saying that it can be done and done in a way that we all don’t have to go Amish.”

“You’re right we can’t wreck our economy to save it…look at what’s been going on over the last year. I can tell you, I care more about keeping my job than the climate right now.”

“Me too.”

“It may be that; but I’m more concerned that it seems to be more about raising money than reducing emissions. And, worse, it seems very partisan or more importantly it doesn’t seem to have widespread political support.”

“Amen, if anyone thinks that we can address greenhouse gas emissions without everyone on board is kidding themselves.”

“See, we’re doomed. Maybe I can play the Mel Gibson role.”

“You’re more likely to play Sponge-Bob.”

“You can’t be serious about expecting a climate bill to be bipartisan? The Republicans don’t even believe climate change is real, let alone are willing to do anything about it.”

“Yes, I’m serious, addressing climate change not only needs to be bipartisan but international too. Unlike anything else we’ve ever dealt with climate and greenhouse gas emissions touches all of us and if we’re all not in it together we’ll fail. Besides, there are a number of Republicans who are willing to thoughtfully address climate: McCain, Crist, Pawlenty, Pataki and Arnold.”

“See we’re doomed. The last frog should turn off the stove!”

“Don’t be so negative. We can solve this if we do it right.”

“I hope so.”

Of course, I’ve taken a little literary license (OK a lot of literary license) in telling this conversation. But, it is the kind of conversation that seems to be occurring more and more in coffee shops, in grocery aisles, across dinner tables, in newspapers' op-ed pages and even in committee hearings. It’s also the kind of discussion that we need to have.

2009-04-10T20:10:00.001-07:00

Corn Ethanol's Unforeseen Externalities: Land Use Impacts

http://www.cbo.gov/ftpdocs/100xx/doc10057/04-08-Ethanol.pdf

A new Congressional Budget Office report released April 9th says the long-term implications of ethanol are not certain in part because of uncertainties regarding land-use impacts and technology breakthroughs in cellulosic biofuels. Both the University of California at Davis and Berkeley researchers concluded the same findings over a year ago. The report was requested by Congressmen concerned that increased demand for corn-based ethanol could drive up food prices.

“If increases in the production of ethanol led to a large amount of forests or grasslands being converted into new cropland, those changes in land use could more than offset any reduction in greenhouse gas emissions--because forests and grasslands naturally absorb more carbon from the atmosphere than cropland absorbs,” the CBO study says. Cellulosic ethanol could reduce emissions from the transportation sector about 6 percent, but the study notes that the technology needed to produce cellulosic ethanol is not commercially available and adds that the reductions “would be realized only if cellulosic ethanol could be produced on a large scale and if the effects of changes in land use did not offset the reduction that producing, distributing, and consuming ethanol could make in greenhouse gas emissions.” According to the study, use of corn for fuel would also add 15% to the price of food, higher in developing countries than developed countries.

Once again, it is imperative that we understand the consequences of "good ideas" before we implement them. Once an interest group forms around government money it is almost impossible to take them off the dole.

Cap-and-Trade: Round Two

2009-04-10T11:53:00.000-07:00

When Congress returns from Easter recess, the debate on climate change legislation, and cap-and-trade in particular, will begin again. Last summer, the Senate briefly debated the Lieberman-Warner bill which would have established a cap-and-trade program to reduce greenhouse gas emissions. That bill died in the Senate.

Now, the debate will take place in the House of Representatives. Last week, Representatives Henry Waxman (D-CA) and Edward Markey (D-MA) introduced a climate change bill that will be the focus of the debate (a link to a summary of the bill is provided below).

While many people are skeptical that a bill can pass both the House and Senate this year, this is a debate worth watching and engaging in, particularly for Midwest businesses. Some people see the legislation as a transfer of wealth from Midwest states - that use coal and are manufacturing centers - to West and East Coast states. In the Senate, Indiana Democrat Evan Bayh has formed a coalition of moderate Democrats who are very concerned about the cost to consumers and the loss of manufacturing jobs in their states that would result from a cap-and-trade program.

Those costs could be staggering. As noted in other posts, the Obama Administration budget projects a cap-and-trade program will raise $646 billion over 10 years. Administration officials have been quoted as saying that the initial estimate may be low and that the program could raise as much as $2 trillion over 10 years. $2 trillion! And as the Wall Street Journal editorial below notes, the Waxman-Markey bill could impact everything in your home from lamps to light bulbs to appliances.

We get all these added costs with no guarantee that greenhouse gas emissions will be reduced as U.S. businesses are driven out of the country to unregulated developed countries which will only drive global greenhouse gas emissions higher.

Get ready for round 2.

The American Clean Energy and Security Act Of 2009
http://energycommerce.house.gov/Press_111/20090331/acesa_summary.pdf

Wall Street Journal: “Henry Waxman Has a Plan … for your living room, showerhead, jacuzzi….”
http://online.wsj.com/article/SB123933057062907775.html

Moderate Democrat Group
http://bayh.senate.gov/news/press/release/?id=b30d7f79-9eb1-4819-980f-9489825825ba

A Better Transportation & Climate Idea

2009-04-09T19:25:00.000-07:00

When I was a staffer involved in the development of the MGA Climate Accord during the summer of 2007, I had considerable faith in the expansive potential of the cap and trade concept to reduce GHGs in a cost effective and efficient way. Today, while I still believe that a cap and trade approach can and should be developed and used in certain circumstances, I no longer believe in its universal applicability.

Applying a cap and trade regime on the owners and operators of the nation’s cars and trucks is just not practical, since unlike electricity generators and even industrial emitters, there are tens of millions of fuel-burning transportation vehicles. The next best idea seems to be to apply the cap and trade at the refinery level, i.e. the level where the crude oil is converted into gasoline or diesel. On it’s surface this sounds like a good and simple solution. However, a refinery produces a product: gasoline, diesel, jet fuel. The refining of the oil into these products emits relatively little GHGs. Rather, it is the combustion of that fuel in our cars, trucks and airplanes that creates GHGs. Thus, if a refinery is held responsible for the GHGs from the fuel it creates under a cap and trade, it must either produce less fuel or purchase GHG offset credits. Neither should be acceptable. One is a form of rationing, the other an indirect cost increase to consumers; both undermining the cost containment and economy efficiency principles that led us to embrace the cap and trade approach in the first place.

It is this new appreciation of the cap and trade’s limitations that led me to conclude that addressing GHGs is more like golf than tennis. While both are great sports (which I play poorly), addressing GHGs is more like golf than tennis. Every tennis court in the world is the same…except for the surface: clay, grass and hard…but they have the same dimensions. While in golf each hole is different and each course is different…posing different challenges to the golfer…like the emissions of GHGs.

A tennis player uses the racquet to hit every shot on the court; while a golfer selects the right club for the specific situation. For example, when teeing off, most people use a driver. But, one rarely uses a driver for a tee shot on a par 3; a different club is needed. One wouldn’t think of teeing off with a tennis racquet or serving with a driver.

What could these other clubs be for addressing GHGs from the transportation sector? Here are some possibilities:

1. Drive less through increased public transit, better, more efficient land use or even walking;
2. Drive more efficiently;
3. Drive vehicles that replace the internal combustion engine with electricity or hydrogen;
4. Use more biofuels…Minnesota is already leading the nation.
5. Make driving or its inputs really expensive through a direct tax or entry tolls a la London’s congestion tax.

These ideas aren’t particularly creative, aren’t my own, have significant drawbacks and are probably very expensive. But, there is a sixth idea, an idea that Bill Ford the executive chairman and chairman of the board of Ford Motor Company supports, that does appeal to me: encouraging people to replace their old cars for new, more efficient vehicles. Below is an op-ed by Mr. Ford published in the USA Today newspaper on March 31, 2009.

Imagine if instead of going through the convoluted political machinations of increasing the cost of travel or reshaping our inherently mobile society, we just encouraged everyone to replace their old, inefficient vehicles with new, cleaner, more efficient vehicles? Use the market carrot of incentives to achieve the GHG-reducing results we want and not the market stick of artificially raising costs. Ratepayers contribute millions of dollars each year for home and building efficiency efforts…why not do something similar for new cars and trucks?

Cash in old cars for new ones: Economy, consumers, automakers would all benefit
By Bill Ford
Executive Chairman and Chairman of the Board
Ford Motor Company
USA Today 3/31/09

In spite of the many challenges our country faces, I strongly believe the government stimulus and other steps to thaw credit markets will be effective in driving economic growth over time.

But we still face an immediate and serious challenge. Last week, President Obama observed that U.S. auto sales have seen a huge drop-off, starkly noting "every automaker is getting killed right now." In just one year, U.S. auto sales have fallen by nearly 50%. And March's sales numbers promise to be sobering for foreign and domestic automakers.

This unprecedented trend is sustainable for neither the industry nor the economy. We urgently need to draw reluctant consumers back into the marketplace. The good news is that there is a proven initiative, outlined by the president on Monday, that can help consumers overcome their fear. The plan also would help the environment and increase energy security. It has been called a "fleet modernization" or a "scrappage" program. Whatever the name it works.

In January, the German government enacted a consumer incentive equivalent to $3,200 to scrap automobiles that are at least 9 years old and buy new, more environmentally advanced vehicles. By February, sales of new vehicles jumped 21% over the same month a year before. Countries such as Japan, France, Italy, South Korea and others are considering or already have similar programs.

This model can work in the U.S., too. President Obama said that he would like to use parts of the economic stimulus package to fund a program that would give consumers a "generous credit" when they replace an older car with a new, more fuel-efficient car.
President Obama has rightly emphasized the importance of vehicle fuel-efficiency gains and expressed concern about shrinking U.S. auto sales and the risk it poses to the economy. This program could help the environment and jobs.

Here's how one bipartisan proposal before Congress would work to stimulate new vehicle purchases. The program would provide vouchers to consumers for vehicles at least 9 years old. The vouchers likely would be worth more than the current value of their vehicle. For example, a consumer who turns in an older car could get a voucher ranging from $4,000 to $5,000 to use as a down payment on a $20,000 car that exceeds 27 miles per gallon. Combined with current auto sales incentives, consumers likely will get unprecedented deals on more fuel-efficient cars.

An independent analyst, Barclays Capital, estimates that this proposal could boost sales by 2.5 million units if 2% of eligible vehicles were traded in. This surge in sales would help preserve American jobs in communities across the country.

Taxpayers are rightly concerned about the federal deficit given the significant spending on the economic stimulus. Let me clarify, Ford is in a different position and is not seeking emergency taxpayer assistance. Nonetheless, Congress needs to spur consumer demand for autos the largest purchase a family makes after a home.

This vehicle modernization idea would require additional investment by taxpayers. Its cost would be dependent on how Congress structures the incentive and its duration. The alternative, however, if sales do not rebound quickly, is more jobs losses, more home foreclosures, and less revenue for governments that must provide more jobless and health care benefits.

In addition to its consumer benefits, this initiative would help reduce our carbon footprint. Automakers are accelerating efforts to reduce greenhouse gases, but the latest fuel-economy rules apply only to new cars. This proposal would help America get greener faster by retiring a portion of the 240 million vehicles on the road. It could reduce our CO2 emissions by millions of metric tons per year.

The program also would help contribute to greater energy independence. Replacing an older car with a new, more fuel-efficient one drives down gas consumption. That helps consumers, too. In fact, the Department of Energy estimates a family could save $780 per year by moving from a vehicle with 18 miles per gallon to one with 30 mpg.

The auto industry, both foreign and domestic, needs to work together to do our part in turning the economy around. But we also need to use the tools that our government possesses, and routinely deploys in so many other ways, to help move the economy more swiftly to a better place.

Improved auto sales will be one of the key indicators that America is on the road to economic recovery. As Congress weighs a national energy policy, climate change or even more stimulus measures, we urge lawmakers to consider this market-based consumer incentive. This fleet modernization idea would be a win-win-win for the consumer, the economy, the environment.

How Future Consumer (Market)-Demanded New Housing Will Help Reduce GHG Emissions

2009-04-08T08:16:00.000-07:00

According to the National Association of Home Builders Housing Facts, Figures and Trends, March 2006, the square footage of housing grew from 983 square feet in 1950 to 2,350 square feet in 2004. When the lethargic housing recovery comes (lethargic because interest rates will be rising due to national debt crowding out private and business borrowing and current homeowners will not be moving so fast), baby boom homebuyers will be downsizing from their McMansions toward smaller ranch houses, townhomes and condos.

This recession is sobering consumers like nothing else could other than aging. By 2020 or so, there will be more people over 65 than under 18. Not good for housing or consumables but great for health care and services. Older people consume services, younger people goods. Once again, the baby boom will change everything. Are you ready?

Over the next 10 years, large numbers of people will be stuck owning homes for which there will be few buyers. This return to rationality, “living within our collective means” will reduce consumer energy consumption and cut GHG output. All of this by market forces rather than government mandate.

By the way, the way to recapitalize the banks is to mandate all banks receiving TARP funds to pay 5% passbook savings. While this is not pure market, it does get the taxpayer something for their generous bailout of the irresponsible banks.

Lessons learned from MGA

2009-04-02T19:26:00.000-07:00

I returned yesterday from the Midwestern Governors Association’s GHG Advisory Group meeting in Traverse City, Michigan. It was the eighth meeting for the group since last March. They have been struggling to fulfill the wishes of the Governors of Iowa, Illinois, Kansas, Michigan, Minnesota, and Wisconsin and the Premier of Manitoba, who, on November 15, 2007 sought to “develop a market-based and multi-sector cap-and-trade mechanism to help achieve GHG reduction targets.” (See Midwestern Greenhouse Gas Reduction Accord at www.midwesternaccord.org). It was also the second to last meeting; the last meeting of the group will be in six weeks on May 11-12 in Minneapolis.

It is less than entirely clear what will occur at that last meeting. While much of the design modeling will have been completed, the group has yet to resolve some key design components. And, even more troublesome, none of the modeling of the economic impacts of those designs will have been completed. Thus, I’m not sure how the group can make any final conclusions let alone recommendations to the Governors.

I certainly did not envision this situation when I, and others serving their governors, embarked on this regional effort in the Spring of 2007. We were so confident and optimistic. What happened?

No blame can be placed on the advisory group members, facilitators or the Governors’ representatives. They all worked very hard, committing hundreds if not thousands of hours to this effort. No, I think the cause stems from the complexity of the issues involved, the need to thoughtfully balance the inherently competing interests and from an overly optimistic goal.

What would I do over I asked myself? Here are some of the things that occurred to me:

One thing I’d do over again is to be more realistic about the timetable. The Accord the Governors signed called for agreement to be reached within 12 months (that would be by last November) with all the states adopting of the model rule 30 months later. Well that’s not going to happen.

Another thing I’d have done over is to be more conscious of how big a task we were undertaking. If the Accord were to be implemented, it would be one of the largest carbon markets in the world. That’s huge on a lot of levels; size matters and in this case that size magnifies the difficulties of achieving the goal.

But size is only one complicating factor that I did not appreciate. I did not appreciate the difficulties trying to create a carbon market in the heart of the country with so many national interconnections that do not lend themselves to easy boundaries. A flawed policy costs jobs as entities move outside of the region.

Another blind spot for me was my faith in the cap and trade concept. I believed that, like a tennis racquet, cap and trade would be the tool that could solve all problems (or make every shot) when properly used. Not only do I no longer have that faith; I believe it to be dangerously wrong. Instead of playing tennis, addressing GHGs is more like golf: we need a whole bag full of clubs, each used when and where it is best suited. For example, applying a cap and trade to transportation fuels reduces GHGs very little if at all, raise gasoline & diesel costs and there is no way to compensate every fuel user for those higher costs through the redistributing of any collected revenues. It is like using a sandwedge off the tee: just not the right club.

Another thing I would do over is expand the membership of the advisory group. There are no people of color or representatives of low-income; there is no member who drives truck or manufactures cars or mines ore or builds engines…these are important perspectives that need to be heard.

I contributed to these shortcomings and regret them. While it’s too late to do things over, it's not to late to learn their lessons and take the appropriate corrections.

2009-04-02T07:53:00.000-07:00

Politicians Continue to Demonstrate What Really Matters to Them--Keep their Jobs!

Senate Vote De-Fangs Cap and Trade Approach To Climate Change

The Senate has voted to impose a super-majority requirement on future passage of any bill – including carbon cap-and-trade legislation – that would increase the tax burden on the middle class or boost overall federal revenues, a move that will likely shape the upcoming climate change debate expected later this year. The provision, sponsored by Republican Sen. John Ensign (NV), was unanimously approved April 1. The Senate also overwhelmingly approved a measure blocking the use of a fast-track budget procedure known as reconciliation as a means of passing climate legislation with a simple majority.

On March 31, the Senate approved an amendment from Sen. John Thune (R-SD) declaring that any climate legislation considered by the body must decrease GHG emissions “without increasing electricity or gasoline prices.” A “clarifying” amendment offered by Environment & Public Works Committee Chairwoman Barbara Boxer (D-CA) softens the language somewhat by suggesting the Senate may consider legislation that doesn’t increase the economic burden on consumers “through the use of revenues and policies provided in such legislation.”

I do not know why I waste my time railing against Cap and Trade and other foolish government ideas when I know they have no courage to do anything controversial.

State's top priority: Protect economy

2009-03-30T09:12:00.000-07:00

Now is not the time to raise the cost of doing business in Minnesota – costs that inevitably are passed along to rank-and-file citizens. That’s not solely the opinion of the business community. The general public believes so, too, according to a poll released March 27 by the Minnesota Chamber.

More than three-quarters of Minnesotans polled believe the government’s top priority should be to improve the economy. Nearly seven in 10 are satisfied with policy-makers’ efforts to address energy and environmental challenges, and about the same percentage believes global warming issues are primarily a federal and international responsibility.

The poll was conducted as three environmental measures are being proposed at the Legislature – a cap-and-trade system for greenhouse gas emissions, a low-carbon fuel standard and the California clean car legislation. The Minnesota Chamber is a strong advocate of a clean environment. At the same time, we oppose initiatives that would place our state and our businesses on an island in public policy at tremendous risk to loss of jobs – and at the same time offer little hope for solving these problems.

The general public agrees, as underscored by the poll. People are clearly concerned about basic pocketbook issues right now, and they don’t want to experiment with questionable, new environmental policies that may get in the way of our economic recovery.

Applying Cap & Trade to Coal Plants Uses The Wrong Tool

2009-03-26T18:02:00.000-07:00

I believe action needs to be taken to reduce GHGs. When designed well and used appropriately, a cap and trade regulatory approach has a lot of value and can effectively, efficiently and economically reduce GHGs. But it is also true that a poorly designed and inappropriately applied cap and trade program can be inefficient, uneconomic and ineffective.

It is this “flip side of the coin” concern that leads me to lament President Obama’s decision to address GHGs through an economy-wide cap and trade program using 100%-auction in his budget. First, I do not believe a cap and trade program is a suitable regulatory tool for dealing with GHGs from the transportation sector. Another concern is that implementing such a program where the government collects the credit auction money distorts market principles that underpin the cap and trade concept. And, finally a cap and trade program is unlikely to reduce emissions from installed coal plants. I will discuss the first two laments in future weeks; for today I will discuss my last concern.

Like any tool, cap and trade is a regulatory approach that works well in some settings and not so well in others. It works well where there are a manageable number of sources that can directly control, limit, replace or trade their emissions in response to increased cap-induced costs. This is why it worked for acid rain precursor emissions like sulfur dioxide from coal burning electric generating facilities. In the GHGs setting, I think cap and trade can work for manufacturing and industrial sectors that emit GHGs as an unfortunate by-product of their production. The participants in these sectors can and will make relatively quick economic analysis of whether reducing emissions through their industrial creativity or purchase GHG credits are in their best interests. The cap and trade approach may even work in the electricity sector when applied to future resource selections.

But as I reflect on a cap and trade approach and watched it’s use in the RGGI states or Europe, it becomes abundantly clear that such a program is a complicated tool crafted by humans with all our good intentions and frailties and inevitable political balances. As a result, I conclude that a cap and trade program is unlikely to reduce GHGs from the nation’s fleet of installed coal plants. This is an important shortcoming, since these sources emit somewhere north of a quarter of the country’s GHGs.

Although there are relatively few coal plants in the country (about 600 or so), unlike SO2, their GHG emissions are integral to their operations. Their GHGs cannot yet be scrubbed or economically captured. Just as important to my analysis, these installed coal plants produce electricity very cheaply and it is very unlikely that the cap will impose GHGs costs so high that newer or cleaner (in the case of natural gas) but more expensive alternatives would be an economic replacement…an alternative to new coal plants, possibly; but not as a replacement of the installed coal plants which produce electricity at under 5cents per kilowatt-hour versus over 10 cents for new. In short, for a cap and trade program to affect the GHGs from these installed coal plants, the imposed very, very high costs; costs so high that closing down is cheaper than buying credits from elsewhere. I doubt the political balancing process will impose such a high cost…it hasn’t yet in the other places that are pushing forward on cap and trade programs.

Thus, what is likely to occur is that the cap and trade program will impose higher costs on the generator that will be passed on to consumers…which of course may affect overall demand but not the emissions from the facility. The result: higher energy costs but minimal reductions in GHGs.

To make matters worse, the cap and trade program may actually encourage the generators to extend the coal plants lives since there would be little incentive to shut them down because the GHG costs will have been internalized or passed through to consumers. Thus, and to repeat for emphasis, the most likely result of a GHG cap and trade program will be higher electricity costs with little GHGs reductions….at least from the electricity generating sector. This should not be an acceptable outcome.

Since the cap and trade is an unsuitable tool for reducing GHGs from installed coal plants, there is a need to think of an alternative. The idea I have is that the installed coal plants should have their own program and certainly be exempted from any cap and trade program as a result. In my program, when a coal plant turns 50 years old it would be decommissioned, and between now and then the owner/operator of the exempted coal plant will work with their utility commissions to begin collecting money and putting it in escrow on the utility’s books for the sole purpose of replacing the energy from that facility (sort of like a pension fund) when it is decommissioned.

The result of this cap and trade alternative would be an orderly and economic phase out of the installed coal plants and replacement with inevitably cleaner facilities a significant environmental improvement…even if they are replaced with new coal plants. Ratepayers would be no worse off than if they were included in the cap and trade program and are likely to be much better off because the escrow collection would be equal to or less than the associated carbon costs a cap. Plus, that money will become down payments for the replacement facilities, reducing their costs and lowering the rate impacts instead of being “redistributed” through government programs. Knowing the end-of-life timing for their electricity generating facilities will prevent very expensive life extending improvements. The result: manageable electricity costs and significant GHGs reductions from the electricity sector…something that probably will not happen under a cap and trade.

Who Would Have Thought C&T is about the Money???

2009-03-25T12:59:00.000-07:00

US Lawmakers, Fearing CO2 Market Crisis, Drafting Tough Rules http://www.dj.com/ March 24, 2009: 01:24 PM ET

A few titillating tidbits from the article sent to me by a dear friend. Please read the whole article. I have been around politics for 30+ years and it is always about the money....!!@! See my previous C&T blogs and let me know what you think. I have no interest in your feelings. They have, after all, gotten us into this mess!

WASHINGTON - (Dow Jones) - "Fearing another financial meltdown under a proposed multi-trillion-dollar greenhouse gas trading program, U.S. lawmakers are drafting legislation for strict regulation of the nascent market."

Wall Street banks, hedge funds and institutional investors are under a rain of public indignation and regulatory scrutiny for their role in the current financial crisis. Many legislators are concerned that creating a carbon market may simply give the same players a new opportunity for manipulation and hazardous trading.

"This is a disaster in the making," warned Rep. Greg Walden, R-Ore., ranking member of the House energy subcommittee on oversight and investigations. "If you like the bubbles of the technology market and the housing market, I predict you'll love the bubble that will come from the cap-and-trade market."

A cap-and-trade law would create a market - including for derivatives of emission allowances - for carbon emissions and would multiply trading opportunities for emitters, traders, brokers and investors.

Cutting A Fat Hog "I attended a recent meeting of an organization interested in [climate change legislation], and guess who it was," Rep. John Dingell, D-Mich., said at an energy forum last week. "It was a bunch of good-hearted Wall-Streeters ... getting ready to cut a fat hog."
Many of the most exuberant, enthusiastic advocates of cap-and-trade are some of the same major institutional investors that were involved in the housing and commodity markets, said Walden, the congressman from Oregon.

"Take, for example, the Regional Greenhouse Gas Initiative, or RGGI, a cap-and- trade system in the northeastern states. According to the list of qualified bidders, among those who wanted to buy credits were a raft of investors that aren't major emitters - trading units of Barclay's Plc (BCS), Goldman Sachs (GS) , JP Morgan Chase & Co (JPM), Merrill Lynch, now a unit of Bank of America (BAC) , and Morgan Stanley (MS)."

One of the biggest advocates in the U.S. Climate Action Partnership, a group that lobbies Congress for cap-and-trade legislation, had been American International Group (AIG), whose controversial financial products unit precipitated the near-demise of the insurance giant.
"Starting with Enron and now the current financial meltdown, energy markets have been a target-rich environment for people to take advantage of the futures price and the physical price," said Sen. Maria Cantwell, D-Wash.

"We don't need to solve our carbon problems by creating another fiscal crisis because we have a trading platform that has lots of holes and ends up being exploited," she said.
Preemptive Regulation Cantwell, who chairs the Senate energy subcommittee, declined to give details but said she's drafting legislation that would prevent manipulation or cash-rich market participants from cornering the market.

In the House, Rep. system of these markets to the nth-degree," said Inslee on the sidelines of a climate conference.
Henry Waxman, D-Calif., is developing a cap-and-trade proposal that will include prophylactic provisions, said Rep. Jay Inslee, D- Wash.
"We have to have the most aggressive, ambitious, fool-proof regulatory "We're not going to allow derivatives to ruin these markets as they have others," he said.

The Political Genesis of Cap and Trade: Late march, 2009

2009-03-24T09:45:00.000-07:00

The Political Genesis of Cap and Trade: The Federal Budget Debate in Late March, 2009

What a week this will be in Congress. As they make hay (read obfuscate), on the AIG bonuses (most of which have been paid back) and look for people to blame (Obama, Bush, Paulson, Geithner, Bernanke), they will begin their discussions of the cap and trade provisions in President Obama’s budget.

Republicans on the Senate environment committee sent their strongest message yet that they intend to strip President Barack Obama’s $3.4 trillion budget of the $646 billion the government expects to collect from auction cap-and-trade revenue by 2020. The eight Republicans said the President’s budget included a “risky, ill-defined new energy tax” that has the potential to continue the economic recession "for many years to come." They also argued the program is likely to generate between "two and three times" as much revenue as the White House accounts for in its budget. Under the leadership of James Inhofe, the letter indicated, “We are writing this letter to alert you to this situation and ask that you join us in a budget resolution amendment to strike any such provision.”

Consistent with his campaign promise, President Obama has called for an economy-wide cap-and-trade system that aims to cut greenhouse gas emissions 14 percent below 2005 levels by 2020, and 83 percent below 2005 levels by 2050. Real cost? Republicans, including former House Speaker Newt Gingrich, have begun saying that a cap-and-trade system would create the equivalent of a “$1,300 per family energy tax increase.” Supporters argue that the Republican argument ignores the fact that higher energy prices would be offset with tax credits, and attack their assumption that doing nothing to address global warming would carry no cost. Laurie Johnson, chief economist for the Natural Resources Defense Council climate center, estimates that unfettered global warming would cost the average American household $2,000 a year by 2025 in climate damages alone. Follow the money. . .watch for Goldman Sachs and Morgan Stanley in the debates.

Follow the money...

Key Senate Democrats are convinced they’ll be able to keep the revenue in the budget. Senator Barbara Boxer, chair of the Senate environment committee, told reporters last week, “It is important to keep the revenues from cap and trade in the budget document, and I am confident that we will do that.” Keeping the revenue language in the budget is an important step to many in Congress, even though the proposed cap-and-trade system wouldn’t begin until at least 2012, and revenue from the first auction won’t start filling federal coffers until sometime in 2011. Shall we guess why this is? The money. It is always about the money (see previous blogs). While the budget language alone is not enough to establish a U.S. cap-and-trade system, it is helpful to those in Congress pushing for the passage of a climate bill by the end of the year.

Senator Kent Conrad’s moves to protect agriculture

Democratic Senator Kent Conrad, chair of the Senate budget committee, said he will release a more streamlined version of the budget this week. He said his proposal includes many adjustments, including the elimination of billions of dollars from the President’s budget and protections for agriculture from greenhouse gas emissions rules! There is no way that Conrad will delete the revenues from the phantom cap and trade system.

Reconciling the mess

Optimistically, Senate leadership has ruled out using the budget “reconciliation” process to pass a cap-and-trade bill. We will be watching this carefully. [Parliamentary rules on reconciliation requires only 51 votes to pass the Senate, as opposed to the 60 votes a cap-and-trade bill would require.] Eight Democrats signed a letter addressed to Conrad last week saying they opposed using the reconciliation process to move a cap-and-trade bill.

Stay tuned for a repeat of the credit crisis under the camouflage of climate change and for future Congressional blame on others. Some things never change.

Shared Goal; Differences of Approach.

2009-03-19T17:08:00.000-07:00

Below is a statement I presented over 10 years ago. While I would make some editorial nods towards recent achievements, (the RPS, increases in biofuels and greater emphasis on energy efficiency), I still firmly agree with this statement. Climate change is real; human emissions are the cause; and we need a fair and comprehensive approach that will actually reduce GHGs. Any criticism offered in these postings should not be interpreted as changes to my long-held beliefs or a wavering of my commitment to address GHGs; rather they stem from legitimate differences of opinion for how to craft a fair comprehensive approach that will effectively, efficiently and economically reduce GHGs around the world, across the nation and here in Minnesota.

CLIMATE CHANGE STATEMENT BY
EDWARD A. GARVEY, CHAIR
MINNESOTA PUBLIC UTILITIES COMMISSION
BEFORE THE
MINNESOTA ENVIRONMENTAL QUALITY BOARD

Thursday, December 17, 1998

Although there are uncertainties, climate change poses a real environmental threat and raises very important long-range public policy issues for Minnesota that will not go away. Therefore, it is in Minnesota’s best interest to develop a thoughtful and comprehensive plan to proactively address the issue.

Before I proceed, I have to make two disclaimers. First, although I am Chair of the Minnesota Public Utilities Commission, the opinions I express today are my own. They do not reflect the views or opinions of the Commission or anyone else for that matter. Second, nothing I say today should be construed in any way and by any party as an indication of how I may decide any matter that is before or could come before the Commission.

I accept conventional scientific thinking that the climate change issue is a real environmental threat. The concentration of atmospheric CO2 is increasing. Increased concentrations of atmospheric CO2 is likely to change the world’s climate posing a significant threat to Minnesota, the United States and the global community. Having said that, I recognize that there are many important unanswered questions: How much will the climate change? How fast could such change occur? What will be the impact of that change? Can we see such change today? How significant are human actions in causing such change?

Although no one can answer these questions with great certainty, there does appear to be a correlation between increased CO2 concentrations and human industrialization. This correlation by itself leads me to conclude that the responsible thing to do is to find ways to reduce CO2 emissions. Minnesotans contribute to the problem and will be adversely affected by a changing climate. Therefore, it is in our best interest to thoughtfully and proactively reduce our CO2 emissions in ways that do not unilaterally disadvantage us.

Besides the environmental threat posed by increased atmospheric CO2 concentrations, there is another reason for Minnesota to be proactive on this issue: it is likely that Minnesota will face the imposition of international and national CO2 reduction regulations in the not too distant future. In 1992, at the Earth Summit in Rio de Janeiro, Brazil, 154 countries, including the United States, recognized (and now 175 countries recognize) the threat posed by increasing atmospheric concentrations of CO2 to the Earth’s climate. They agreed to pursue voluntary reductions of CO2 emissions. After several intervening meetings, they went a step further a year ago in Kyoto, Japan. The Kyoto Protocol, which the US signed during the Buenos Aires Convention this past November, creates an international framework for mandatory CO2 emission reductions for developed countries. Under this framework, the United States agreed to reduce its CO2 emissions by 7% from 1990 levels during the 2008 to 2012 time period.

I attended last month’s Buenos Aires Convention representing the National Association of Regulatory Utility Commissioners. The primary agenda of that convention was to address the Kyoto Protocol’s flaws and resolve its many implementation issues. The lack of CO2 reduction commitments by developing countries, like China, is a major flaw of the Kyoto Protocol. The diplomats tried to address this issue but achieved little if any direct progress. However, there was a lot of maneuvering and discussion between the countries, led by Argentina, giving me hope that the stalemate can be broken.

As for implementation, the diplomats spent many hours trying to agree on how to implement CO2 trading and other flexibility measures. Such flexibility is needed to minimize the costs of CO2 reductions. Again, due to international politics there was little direct progress. However, the conferees did agree on a workplan with results to be brought forward in October 2000.

Although there was little formal progress in Buenos Aires, we should take note that the on-going international stalemate is over how to develop and implement CO2 reduction efforts, not whether we need to do so. The science of climate change was not questioned.

This observation makes clear to me that we Minnesotans ought not be ostriches hiding our head in the sand hoping that the climate change issue will go away. It will not; the issue and its ramifications will only grow. Therefore, it makes sense for Minnesota to get ahead of the curve and control our future by developing a thoughtful and comprehensive plan to proactively address the climate change issue. New Jersey and Oregon have done so. So have a number of major Minnesota companies. We should too.

In making this recommendation, I do not believe that Minnesota can solve this global problem by itself. Nor do I think that we should try and thereby shoot ourselves in the foot economically. But, in small ways, we can lessen the environmental threat and prepare ourselves for what is to come.

In developing a proactive plan, it ought to be comprehensive, thoughtful and deliberative. Because everyone uses energy and thereby contributes to the problem, everyone must be made part of the solution. Accordingly, an inclusive process that assures that all interested people can and do participate is needed. Also, no one industry or economic sector should bear the costs of addressing this threat by themselves. The costs of CO2 reduction should to be borne fairly by all.

We need to be mindful of the uncertainties and make sure that whatever steps we take do not unilaterally disadvantage us. We cannot solve this problem overnight and it is counterproductive to try. Today’s solutions should not become tomorrow’s problems. Similarly, we must think creatively. It will probably take new and different ways of doing things to address this issue.

Finally, we must be proactive. We must set goals and take action by pursuing the low hanging fruit while simultaneously planting trees--both figuratively and literally speaking--so we can reap them as they mature in the future. Here are just a few ideas that come to my mind: devising ways to assure that companies that reduce their CO2 emissions receive credit for their good work; striving to achieve even more energy efficiencies; examining our tax structure to find ways to promote capital stock turnover; continuing to use and promote low or no-CO2 emitting energy sources; managing our forest and agricultural lands for carbon sink potential; and finally examining our regulations to make sure that they do not work at cross purposes or unnecessarily add costs.

Although reducing CO2 emissions is key, the cure must not be worse than the illness. We must not take actions that would unilaterally disadvantage our citizenry or industries. Instead, we should focus on flexible market-based measures that strengthens the state’s economy both today and tomorrow.

To conclude, climate change is a real environmental threat posing difficult public policy choices. The sooner we develop a thoughtful comprehensive plan that identifies those policy choices and proactively implements them, the better off Minnesota will be. Thank you for this opportunity to address you today.

Surprising Research Results

2009-03-18T14:56:00.000-07:00

Last month, researchers at the University of Minnesota released a study which looked at the environmental and health costs of three different fuels – gasoline, corn-based ethanol and cellulosic ethanol. They calculated the combined environmental and health costs associated with the production and combustion of 1 billion gallons of each of these fuels. Here is what they found:

Combined Environmental & Health Costs
Gasoline - $469 million (71 cents per gallon)
Corn-based Ethanol - $472 - $ 952 million (72 to about $1.45 per gallon)
Cellulosic Ethanol - $123 - $208 million (19 to 32 cents per gallon)

Based on past statements about the benefits of certain types of renewable fuels and even bolder promises about what these fuels hold for the future, most people would be surprised that corn-based ethanol had the highest combined cost of the three fuels that were studied.

This is just one study. Subsequent research may substantiate or refute these results. But as the policy debate over how we should go about diversifying our fuel supply continues, this study is a reminder that we need to embrace valid scientific developments and develop sound public policy that is well founded both scientifically and economically.

A link to the study is here: http://www.pnas.org/content/early/2009/02/02/0812835106.full.pdf+html

The MGA Conundrum & Successful Journey

2009-03-12T19:15:00.000-07:00

It seemed like a good idea at the time: Get the states of the Midwest to work together on increasing the region’s renewable energy and energy efficiency. And, while doing that why not think about reducing greenhouse gas emissions? So, about two years ago Governor Pawlenty and Wisconsin Governor Doyle used the auspices of the Midwestern Governors Association (which Doyle was chairing) to do just that. The result was the Energy Security and Climate Stewardship Platform and Midwestern Greenhouse Gas Reduction Accord signed by most of the governors of the Midwest in Milwaukee, Wisconsin in November 2007.

It did seem like a good idea at the time. Recall 2007. The economy was riding high. That October the stock market set an all-time high. Most states were on renewables bandwagon. Also, remember the frustration on the Federal government’s inaction on climate. Moving thoughtfully, collectively and certainly very ambitiously forward seemed like the correct thing to do.

How the times have changed. The economy is on the ropes; the stock market is tanking, and for better or worse, the Federal government has awoken from its inactive slumber. Thus, what seemed like a good idea once has now turned into a conundrum for the Governors.

Countless hours by hundreds of stakeholders continue to work on the cap and trade analysis and all the other MGA energy activities which are suppose to culminate at a big energy and green jobs summit in September…most likely in Michigan since Michigan Gov. Granholm is the current MGA chair. Yet, as the economy and the President’s actions make clear both achieving the ambitious goals is unlikely and unneeded.

What to do? My answer is to keep plowing ahead, get as far as possible (knowing that it will not be very far) and declare victory! As a great philosopher said: It’s the journey not the destination that matters.”

Another facet of that journey is about to start with the MGA consultants doing two types of model runs. The first set of model runs will be a core policy case, i.e. cap-and-trade plus the complementary action estimates like energy efficiency gains, low carbon fuels, etc. and a pure cap-and-trade case, i.e. no complementary policies/goals. These first policy model runs should be done prior to the next MGA advisory group meeting scheduled for Traverse City, Michigan on March 31/April 1st.

The second set of runs will test sensitivity of various cap-and-trade design parameters like changing offset limits, sectoral coverage, geographic coverage, targets and transportation fuels in or out of the cap & trade. These runs will be done in mid-April.

Despite all this work, will the Governors be able to declare success in September? The answer is “yes, sort of, and no.”

Yes, the MGA climate and energy efforts will be a success; they already are. They have policy leaders, key agency staffers and stakeholders from across the region working together, thinking through issues and learning important things. This cooperation, coordination and communication should not be discounted. It will pay important dividends.

The MGA effort will only be “sort of” a success to the extent that beyond the coordination the groups have not reached agreement on many critical issues. Yet, one should not discount the learning that has occurred on what it takes to create a regulatory regime to reduce GHGs. Understanding issues like offset implications, leakage and boundaries, impacts of including or excluding transportation fuels and the cost impacts of these variations are, while not tangible, successes of a sort that ought not be discounted. While cohesive regional action is unlikely it also puts our region at risk of aggressive Federal action dominated by decisions made in California and New England. These are not regions that have a very different industry, agricultural and energy production profile than our Midwest.

If success is defined as the actual implementation of a regional cap and trade program, then the answer will be “no.” However, this may not be a bad thing given everything that’s going on. In fact, in many respects even in “failure” the MGA energy security and climate effort can be a success. The MGA governors need to keep moving forward; keep working through the issues even if they are intractable. Keep communicating; keep coordinating and keep cooperating. And, throw a big victory party in September because as country singer Rodney Atkins sings--“If you're going through hell, keep on going, don't slow down. If you're scared, don't show it. You might get out…before the devil even knows you're there!”

Self-sacrifice to reduce greenhouse gases...No more economic ponzi schemes

2009-03-11T12:32:00.000-07:00

We cannot afford more economic trickery so we must carefully consider and then reject any type of cap and trade program for reducing greenhouse gases. They are complex, make assumptions that are untested in the real world of market economies, and will cost taxpayers billions if they do not work the way their advocates suggest. Their principal advocates are a rag tag coalition of big businesses, environmentalists, and investment banks like Morgan Stanley and Goldman Sachs. Their leaders in Congress hail from the state we all want to emulate - California, just kidding!

If we believe that rising greenhouse gases are a problem and we want to lower them, then we should raise the consumer retail price of greenhouse gas producing products and services so that all of earth’s citizens sacrifice for the good of the planet. It is just plain old common sense that all countries should have to follow the same rules so that we all make financial and comfort sacrifices for future generations of Earth’s people. If we are unwilling to turn our thermostats down in winter and up in summer as well as paying more for the energy that we consume in our homes, cars, snowmobiles, four wheelers, boat motors, airplanes, etc., than climate change is just another economic ponzi scheme for the rich and powerful.

After what we have been through in housing finance, anyone who believes that America’s largest corporations, federal regulators, Wall Street, and our insulated, elitist, take-no-responsibility-for-anything elected leaders are looking out for our collective welfare is just plain stupid and beyond redemption.

There are some who suggest the redistributionist notion that wealthy countries like America and the EU countries pay the price of cleaning the air for all. While it is true that Americans and Europeans consume more energy than say South America or Africa, it is also true that many of the innovations discovered in these “wealthy countries” have been shared with those less developed countries. After all, America did rebuild West Germany, much of Europe and Japan after WWII. This is not new behavior for the U.S. Further, think about how much greenhouse gas is created in a war!

It is also true that China and India are consuming more energy with each passing day as their populations are transformed from poor to middle class, rising because of the consumer driven economies of the west. [note: I support transforming America’s economy to a more savings and investment economy and away from “shopping and goods are necessary for happiness” economy. If we put more private investment into biotechnology research and product development, for example, we would improve the world’s water, food production and quality as well as the general health of the world’s citizens.]

This would require a significant tax on greenhouse gas producing goods and services. It is in this direct, transparent manner that we will test the steel and commitment of American consumers to climate change. The most rapid climate change advocates say that transparently raising taxes will not work and support the back-door cap and trade scheme. They are wrong.

President Obama does not seem at all bashful about standing up for his principles even if that means doing unpopular things in the short term. He certainly does not seem to be adverse to raising taxes or to continue the Bush legacy of debt (future taxes) if necessary. It is time that we tie what Americans say they want to self-sacrifice to determine if they are really committed.

I’m for higher consumer retail taxes on all greenhouse gas producing goods and services. Let’s all sacrifice for the greater good or turn our attention to something we are willing to make sacrifices for. What do you think and why?

More reasons for cap and trade skepticism…
http://www2.canada.com/ottawacitizen/news/letters/story.html?id=7830f4f2-6a30-48ab-b0a6-2e130dacc6ed

“The Kyoto Protocol introduced Carbon Credit Schemes (CCS), which would permit the bigger polluters (oil and gas companies, paper mills, etc.), and even provincial governments, to purchase carbon credits to give themselves a better image and conscience. The schemes were set up so that those polluters could buy carbon credits when they are unable to reduce their greenhouse gas emissions equal to or below the industry set quotas.”

“They will try to deny that it is a license to pollute. They will try to convince us that it will be an incentive to the polluters to finance projects that are less polluting. We won't understand a word they say. They will try to explain concepts that only the initiated will be able to understand. They will dangle the prospect of a bright future. Don't be fooled.”

“The rest of the schemes proposed are all show, which will only lead to price increases to the consumer. We see it every day, big polluters never are embarrassed to increase consumer prices. In five years, greenhouse gas emissions will not be reduced globally; to the contrary. The lure of profit money is too great.
And these carbon credit schemes will become the next financial scandal that will burst and impact us. Consumers should remember: If a deal sounds too good to be true, it probably is a trick deal. Therefore you need to abstain from investing.”

The costs of patchwork climate change regulation

2009-03-06T12:11:00.000-08:00

These days it is hard to turn on your computer or watch the television without coming across a discussion of some variety on greenhouse gas (“GHG”) emissions and climate change. Some continue to question climate change or whether anthropogenic GHG emissions are a primary cause. Others point to government-backed scientific organizations and argue that the only question is how to prevent the predicted dire planetary consequences.

While these debates continue to provide coffee shop fodder, the legal reality of GHG emissions for the average American energy producer, mining company, or other large scale carbon emitting business is one of costly uncertainty. This legal reality traces back to the April 2007 United State Supreme Court decision of Massachusetts v. EPA, which concluded that that carbon dioxide and other GHGs are air pollutants under the federal Clean Air Act. In reaching that conclusion, the Supreme Court stated that the “harms associated with climate change are serious and well recognized” and that there is a causal connection between anthropogenic GHG emissions and climate change.

Decision makers across the nation from state district courts (Georgia decision), to the Environmental Appeals Board (EAB decision) have looked to Massachusetts to decide legal questions relating to GHG emissions. Since this represents the opinion of the highest court of the land, the current trend towards judicially-mandated GHG action is going to continue, at least until the Supreme Court revisits the questions or Congress and President Obama take legislative action. Of course, the early signs are that the EPA under President Obama is going to be more active on GHG regulation, not less.

The problem for American businesses is that the combination of the Massachusetts decisions and the relative inaction at the federal level has created a legal quagmire that has spurned costly court battles and administrative challenges to state and federal agency decisions. Given the current state of affairs, the closest thing to a guarantee for a company with significant energy production or needs that is entering the environmental review or permitting process is there will be a challenge to any agency decision based on GHG emissions. We now are beginning to see the effect of the regulatory uncertainty as a major planned utility plant was cancelled.

Given the trying financial times we now face, the certainty of costly litigation is just one more reason to look elsewhere for any potential project or to simply forego the project all together. There are some that may say “great, inaction is good for the environment.” But the reality is that as worldwide consumption of fossil fuels and other raw materials remains the same (or more realistically continues to increase), the notion that preventing a project here is good for the environment simply does not past muster. So long as there is demand, companies will find a way to meet that demand as cheaply as possible. In the current state of patchwork local and regional GHG “regulation” companies will face economic pressure to move potential projects to states with a more conservative approach to GHG emissions or to nations that have little to no environmental controls. When you are dealing with a “global pollutant” like GHG emissions, we do nothing to reduce emissions globally or in our backyard by simply pushing off business to another jurisdiction. In these trying times, if there is going to be GHG regulation shouldn’t it be done in a way that actually helps the environment and that does not disadvantage Minnesota businesses compared to state locations or chase American businesses outside our borders?

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.

Mergens serves on the Minnesota Chamber of Commerce Environmental and Natural Resources Committee. He is also involved with the Minnesota Environmental Initiative, the United States Green Building Council – Mississippi Headwaters Chapter, and the Environmental Section of the American Bar Association. He received his juris doctorate cum laude in 2002 from the University of Minnesota Law School. He is admitted to practice law in Minnesota, California and Arizona, as well as in the United States District Courts for Minnesota and the Central District of California.

President Obama’s Unfortunate Cap & Trade Proposal

2009-03-05T17:11:00.000-08:00

Last week President Obama announced his budget proposal. (http://www.whitehouse.gov/omb/). On page 21 of the 120-page budget summary, it announces the President’s plan to reduce greenhouse gas emissions through a “cap and trade” program:

After enactment of the Budget, the Administration will work expeditiously with key stakeholders and the Congress to develop an economy-wide emissions reduction program to reduce greenhouse gas emissions approximately 14 percent below 2005 levels by 2020, and approximately 83 percent below 2005 levels by 2050. This program will be implemented through a cap-and-trade system, a policy approach that dramatically reduced acid rain at much lower costs than the traditional government regulations and mandates of the past. Through a 100 percent auction to ensure that the biggest polluters do not enjoy windfall profits, this program will fund vital investments in a clean energy future totaling $150 billion over 10 years, starting in FY 2012. The balance of the auction revenues will be returned to the people, especially vulnerable families, communities, and businesses to help the transition to a clean energy economy.

Since this program is in a budget bill, it appears that President Obama wants to make the climate debate more about how to raise and spend money than actually reducing GHGs. This is very unfortunate; hold on to your purse or wallet!

Using the phrase “biggest polluters” is also unfortunate. In fact, I think it is both inaccurate and counter-productive. Everyone emits greenhouse gas emissions…we all contribute to the problem when we turn on a light, heat our homes or drive our cars. It’s an “all of us polluters” problem, not just a “big polluter” problem. So, to use such a phase sends the wrong message and undermines the need for everyone to collectively take action. And, without this collective action there will be no solution.

There are several things I can say about the “100 percent auction” approach, but let me focus on one thought: the only thing a 100% auction assures is that all traditional energy sources will be made more expensive. It is also likely to be unfair and economically distorting. Rich entities or entities that can pass the costs along that need GHG credits will pay any price; but poor entities may not be able to afford the price and will be forced out of business regardless of their value to society. Such economic unfairness and distortion in the marketplace is unfortunate.

The proposal says an auction is needed so the biggest polluters “do not enjoy windfall profits.” This is government-speak for saying what you were doing yesterday had no value but now it does and we don’t want you to benefit from the new value so we (the government) will take it from you. This adds insult to injury. And, I find it ironic that at a time when the Federal government is pouring billions of dollars to bail out banks, they are worried about windfall profits of energy producers and users.

While a cap and trade approach may be an effective way of reducing GHG emissions in some situations…it is not effective for every situation. It doesn’t work for transportation and I am doubtful that it will result in reduced GHG emissions from established coal plants, the two largest sector sources of GHG emissions.

The President’s plan is silent on the role of the states. So, since it doesn’t say, “working with the states...,” I assume President Obama’s message is that the Federal government will impose the cap and trade, run the auction, collect the resulting money and then dole it out. But there are states, including Minnesota, that also have their eye on that money for themselves.

Similarly, I wonder whether states will have a role independent of the Federal government in reducing GHG emissions. There are five options for states. The simplest options are pre-emption (which I favor) or grandfathering. Another option is for the Federal government to delegate some controlling authority to certain states that meet a minimum set of conditions. A fourth option is to grandfather a more aggressive lead state (can you say California?) and then allow other states to adopt that state’s standard or accept the Federal standard. Finally, there could be “cooperative Federalism” where the Federal government and states jointly implement a set of standards. It is unclear which option the President wants.

There will be an interesting intergovernmental skirmish and unfortunately, pretty soon everyone will forget that the goal is to reduce GHG emissions.

Thus, in this single paragraph, President Obama is proposing to change the nation’s energy marketplace, affect every Americans’ finances, and reshape the Federal-state relationship. And, would do all this in a way that probably will not even reduce GHG emissions. Very unfortunate and disappointing.

Can We at Least Get the Facts Straight?

2009-03-02T07:30:00.000-08:00

It is becoming increasingly clear that despite the severe economic recession we are in, Congress will take up climate change legislation this year. In his address to Congress last Tuesday night, the president reiterated his support for a cap-and-trade program and asked Congress to send him “legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America."

In order to have an informed debate, we need to have a firm factual foundation to start the discussion. However, much of the news coverage of this issue gets basic facts wrong. For example, an Associated Press article about the President’s speech says, "The United States is the world's largest emitter of carbon gases, blamed for global warming, yet the previous administration of president George W. Bush walked away from the 1997 Kyoto treaty aimed at battling climate change."

There are several things wrong or incomplete in that one sentence. First, there is no disagreement among people who follow this issue that China has surpassed the United States as the largest source of man-made greenhouse gas emissions. According to the World Resources Institute, in 2005 China contributed 7.249 billion metric tons (BMTs) – or 18.72% - of global man-made GHG emissions. The United States emitted 7.09 BMTs - or 18.33%.

Second, the Kyoto Protocol was rejected not only by President Bush, but also the United States Senate. On July 25, 1997, the United States Senate voted unanimously – 95-0 – for the Byrd-Hagel Resolution (S. Res. 98), which stated the sense of the Senate was that the United States should not be a signatory to any protocol or other agreement that did not include mandatory greenhouse gas emission reduction targets and timetables for developing nations as well as industrialized nations, or that would result in serious harm to the economy of the United States.

While the Clinton Administration signed the Kyoto Protocol in 1998, the Administration never submitted it to the Senate for ratification because it was clear that the Protocol would not be voted on until there was participation by developing nations.

In light of the recent and future projected growth of greenhouse gas emissions in “developing” countries like India and China, the sense of the Senate in 1997 is even more relevant today.

First Economic Triage, Then Pursue the Clean Energy Economy

2009-02-26T19:20:00.000-08:00

America’s hurting. Patient USA is suffering a serious economic trauma and has for a while. And, instead of healing, it seems to be getting worse. The symptoms are obvious on every newspaper front page; with each new low of the stock market; at the top of every nightly news program; on streets with as many “for sale” signs as mailboxes. The less obvious pain is seen on monthly 401k statements, empty food shelves, lonely retail merchants and wrap-around lines at unemployment centers.

Our country needs economic triage more then ever. As a result, no matter how worthy, all the ideas and programs to promote the carbon-free, clean-energy economy of the future may be, they should be put on hold. They are hopeful luxuries that we cannot afford right now and that are distracting the nation from the triage that needs to occur.

I am not a medical expert, but I have extensive medical TV show watching experience going back decades to M*A*S*H, and more recently SCRUBS, ER, Grey’s Anatomy and, of course, House. And, what I have learned is that, when confronted by a medical trauma doctors pursue a three-step process: First, they stabilize the patient, addressing the trauma like stopping the gushing blood, restarting the heart, controlling the seizure or clearing airway passage, etc. If it is a big event with multiple traumas the doctors perform “triage,” where they sort out the injuries according to the severity of their trauma.

The next step is to identify and treat the cause of the trauma. Sometime this is easy like removing the bullet, fixing the fractures, sew-up the lacerations, etc. In other times it is very hard, as the symptoms point to conflicting or multiple causes…liver damage, cancer, diabetes, allergic reaction, bug bite or some very rare disease. It is this search for the mysterious cause that makes House and even PBS’s Medical Mysteries so interesting.

Once trauma causation is established the doctors then prescribe recuperative therapy to make sure the trauma doesn’t reoccur, repair the patient’s physical health, and restore their psychological well-being. Of course, these elements blur depending on the trauma….how doctors treat a car accident trauma is different from someone afflicted with a cancer, but the 3-step “stabilize-treat-recovering therapy” is the common approach.

Unfortunately, the nation’s economic doctors are not implementing the medical three-step process in reverse. Yes, the problem is so big, growing and has so many moving parts. But that’s why doctors work through the three steps. Instead, our economic doctors are skipping the first two steps and rushing forward with bailouts, policy plans, stimulus packages, lopsided budgets that claim the cure is a carbon-free economy, low carbon fuels, California car standards. But the problem grows more severe.

In the mean time people are being thrown out of work and retirement accounts are getting pummeled. This seems like treating a gun shot patient arriving at the ER with a visionary lecture of how great their life will be if they start eating better, get more sleep, doing yoga and begin taking Omega-3 for their heart.

Don’t get me wrong…just about everyone should probably eat better and get more sleep, and I do enjoy my yoga….and I truly do think we must pursue green jobs, renewables and reduce our carbon footprint…but that time is not now. It is not what the patient, the state or the economy needs at this moment. It’s time for real economic triage; its time to help people put food on their tables; its time to restore confidence in the financial systems. Only once we have done that can we return to implementing the needed carbon-free, clean-energy restorative therapies.

Follow Inside Energy on Twitter

2009-02-24T11:33:00.000-08:00

Being a part of the conversation about energy issues that affect you has never been easier.
On your phone or in your e-mail “inbox,” you can receive Inside Energy updates through Twitter. If you are new to Twitter, it allows you to send and receive short text messages (up to 140 characters) to and from your friends or “followers.”

Check out www.twitter.com to become an Inside Energy follower. It’s easier than you think, and it will keep you in the know on Minnesota energy issues.

Three Hopes & A Trillion-Dollar Wind Commitment

2009-02-19T17:05:00.000-08:00

I am a hopeful person. So, let me share three of my current hopes with you. My first hope is that, despite my skepticism, I truly am hopeful that President Obama’s stimulus package and the other stuff he’s doing pulls the nation out of our economic tailspin. Something needs to be done; this might not be it, but then again it might be. There are lots of times when I thought something would turn out badly, and they don’t….and my daughters always seem to remind me of those times. So I hope that my daughters are more correct than I feel on this issue and that the actions the Obama Administration is taking will work.

My second hope is that I can do my part for the economy and go on a spring break vacation, especially to some place warm, with sand and swaying palm trees and fresh guacamole. Implementing such a maneuver is a kaleidoscope of moving parts of money, intricate family scheduling, spousal agreement on location, just-a-little-too-late advanced planning and, oh did I say “money.” Perhaps, the stimulus package will solve at least a couple of these issues. I certainly hope so.

My third hope is that stimulus bill’s relatively small down payment on renewable energy and improving the nation’s transmission system spurs the very large investment needed to tap the potential of the nation’s wind resources and deliver it throughout the country. Like planning my family vacation, achieving this hope will require a lot of time, money and effort.

On Monday, February 9, 2009, a group of major transmission owners and operators in the Eastern US made up of the Midwest ISO, Southwest Power Pool, Inc., PJM Interconnection, the Tennessee Valley Authority, Mid-Continent Area Power Pool (MAPP), and participants within SERC Reliability Corporation (SERC), who have been working on the “Joint Coordinated System Plan (JCSP’08),” announced their initial analysis of how much it will cost to provide significant amounts of wind to the eastern two-thirds of the country…from the Rocky Mountains to the Atlantic coast.

The planners looked at two wind scenarios and examined the transmission and generation implications of them for the years between 2008 and 2024. One scenario assumes an increase in wind energy so that 5% of the region’s electricity comes from wind. The second scenario envisioned 20% of the region’s electricity coming from wind as proposed by legislation in the US Congress mandating a national renewable standard.

The analysis estimates that meeting the 5% wind scenario will require the addition of approximately 10,000 miles of new extra-high voltage transmission at a cost of approximately $50 billion, in addition to nearly $700 billion in total wind generation capital costs by 2024.

The other scenario, that of 20% wind, is estimated to require 15,000 miles of new extra-high voltage lines, at an estimated cost of $80 billion, in addition to $1.1 trillion in total generation capital costs by 2024.

So, $750 billion gets us 5% wind and $1.2 trillion gets us 20% wind….or, for comparison purposes, this is almost as much as we’ve spent on the stimulus bill and bailing out Wall Street. That’s a lot of money, no matter how you cut it. However, just as I hope the stimulus bill provides the needed economic elixir and that in a month or so I am completing my collection of drink umbrellas and listening to the gentle lapping of the Caribbean sea, I hope we can push forward to strengthen the country’s transmission grid and make wind a significant part of the entire nation’s electricity portfolio, not just Minnesota’s.

2009-02-17T09:19:00.000-08:00

My liberal, thoughtful, and intelligent son and daughter-in-law and my more moderate, scientific/fact oriented daughter and son-in law frequently remind me that it is important to give people a taste of what I am reading to arrive at the conclusions that I do.
For many reasons, their advice makes a lot of sense. In a world of such constant “Orwellian messaging” Gen Xer’s and Gen Y’s (Millennials) have developed into skeptical and independent thinkers not easily led to water.

That gives me hope since my own generation, none of whom could vote for John Kennedy or Richard Nixon in 1960, voted first for Lyndon Johnson and then for Richard Nixon and Jimmy Carter and then by a landslide for Ronald Reagan (he cut taxes, increased spending (raising the deficit and national debt) and raised taxes (TRA 1986- with the help of a Republican Senate and Democratic House,---- hardly a roster or record to inspire trust in politicians of either stripe.

So because my children were strong learners and now good teachers in their own right, here are some of the sources that I read over the past year that helped me formulate my huge skepticism over whether a Cap and Trade system to reduce green house gasses will work as opposed to make a lot of corporations, governments, and investment houses rich. Remember the genesis of the housing crisis---“we know what is best for you: all American’s should own a house!” Now all American’s should believe in Cap and Trade to reduce green house gases. Fool me once….

I hope that you notice that my readings are comprehensive and range from Mother Jones to Business Report to SF Chronicle and WSJ, from the Huffington Post to the U.S. Carbon Report and Cleantech. It must be that excellent liberal arts education I got when young that refuses to believe one source in search of truth.

Diversity of opinions is both stimulating and fun but we cannot afford what I call “diversity of facts.” Arriving at some understanding of the facts, requires effort and some intellectual rigor, characteristics often lacking in contemporary media-theatre.

In any case, here are some places for you to go to check out what I have been reading and to determine for yourself what you think about big government, big corporations, big investment banks--- Cap and Trade.

Nobody's Talking Cap-And-Trade Now, But Goldman Sachs Bets On It http://www.huffingtonpost.com/2008/10/27/nobodys-talking-cap-and-t_n_138083.html
Waxman Vows to Pass Carbon Cap as Republicans Promise ‘Battle’
http://www.bloomberg.com/apps/news?pid=20670001&refer=&sid=aeyvIQW_L6bQ
Cap and Trade makes Strange Bedfellows
http://uscarbonreport.com/cap-and-trade-makes-strange-bedfellows/
Carbon markets conference under way
http://www.bizjournals.com/southflorida/stories/2009/01/12/daily49.html
Industry, environmentalists gang up on climate
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/01/15/BUPV15BBN9.DTL
Cap and Trade
http://www.motherjones.com/kevin-drum/2008/12/cap-and-trade
Obama administration could fast track cap-and-trade, RPS in '09
http://cleantech.com/news/print/4081
3.2.1. Positions of the Parties: California Legislation
In this section, we summarize the input received from parties on the subject of the type of regulation appropriate for the electricity sector in California.
3.2.1.1. Cap-and-Trade System
http://docs.cpuc.ca.gov/PUBLISHED/FINAL_DECISION/80150-02.htm
Comments of Morgan Stanley Capital Group, Inc.
Western Climate Initiative Work Plan and Design November 30, 2007
www.westernclimateinitiative.org/ewebeditpro/items/O104F14469.pdf
HOW’S THE CARBON OFFSET BUSINESS? GOLDMAN SACHS BUYS IN
www.energystocksblog.com/2008/10/29/how’s-the-carbon-offset-business-goldman-sachs-
Another Inconvenient Truth
www.businessweek.com/magazine/content/07_13/b4027057.htm
F.T.C. Asks if Carbon-Offset Money Is Well Spent---“Greenwashing”
http://www.nytimes.com/2008/01/09/business/09offsets.html
Carbon Offsets: Government Warns of Fraud Risk: NPR
www.npr.org/templates/story/story.php?storyId=17814838

2009-02-13T11:18:00.000-08:00

Part II: Government Solutions Cap and Trade—a “Subprime” idea whose time should never come….

Results of the 40 year War on Drugs is just one prominent candle illuminating the plethora of failed big government programs presaging the future results of a mandated Cap &Trade program that looks increasingly likely to be considered by the U.S. Congress this year unless the American people just say “No.”

The United States has some of the world's most punitive drug policies and has led the cheering section for tough "war on drugs" policies worldwide. But a new international study suggests that those policies have been a crashing failure. A World Health Organization survey of 17 countries, conducted by some of the world's leading substance abuse researchers, found that we have the highest rates of marijuana and cocaine use.

Of course, this is just one graphic, more commonly understood government program that is a massive failure at accomplishing its stated goals. For the sake of perspective, the program began in the early 1970’s under President Nixon and has been a government priority ever since, approximately 38 years! Of course, advocates of the program dismiss such empirical data with the same old refrain, “we never had enough money to do the job right.” How many times have we heard this same worn out refrain from the advocates of government programs? Accountability and transparency is not the forte of government. At least when the private market fails, someone pays the piper, the business fails, something happens. When government fails it is always about not having enough money to do the job right!
http://online.wsj.com/article/SB123439889394275215.html%20
http://www.alternet.org/drugreporter/90295/

Maybe we should question the International Energy Agency, an intergovernmental agency acting as an energy policy advisor to 28 member countries. According to their website, http://www.iea.org/, IEA was “founded during the oil crisis of 1973-74” “to co-ordinate measures in time of oil supply emergencies.” How do you think they managed the oil crisis of just 6-12 months ago? Were the member countries informed in time so that there citizenry could adapt or did the gigantic rise in oil prices that shocked us all? The answer requires a little common sense which most Americans have in good supply.

Demand for oil world-wide outstripped supply during good economic times driving prices higher. We all know what happened next. Recession, less demand, lower prices. As of this writing gas prices are rising because we are driving more (due to lower prices) and we are approaching the spring/summer driving season and demand is increasing so price rises gradually in preparation for that demand. No surprises here, just Common American Sense.

Looking back in 40 years (February, 2049), what makes any rational American believe that a Cap and Trade Government program will reduce green house gas emissions with any greater success than the War on Drugs? And think about the cost…it will stagger the imagination even when compared to today’s outrageous bank, insurance company bailouts , stimulus plans, etc.

Given the borrowing binge started by George W. Bush and Congress (remember, he cut taxes, fought two wars, and increased entitlement spending by the more than any President since Lyndon Johnson---with his Prescription Drug Program for Seniors! By charging it to the National Credit Card ---our children and grandchildren pay higher taxes or get less services.) There are no free lunches, despite the best workings of the political propaganda machines on both sides of the isle in Washington.

And it looks like the mountain of debt is about to increase more under the Democrats who vociferously criticized the stark accumulation of the Bush/Republican mountain of debt.

To conclude, I would urge readers to carefully consider whether we really want to add another government bureaucracy, “The Federal Cap and Trade Agency” to our government that will eventually need a “bailout” when the carbon market collapses for reasons one can only imagine.

I can only surmise that a few big investment banks will be in the middle of it when it happens.
Remember, that despite the failings of “market economies,” at their worst, they are better than taxpayer funded government monopolies lacking accountability until it is too late to do anything but play the blame game and get taxpayer funded bailout.. Let’s not fall for it twice.

Pet Peeves and Unusual Congressional Forbearance

2009-02-12T19:35:00.000-08:00

In her February 11, 2009, Conference Report describing the economic stimulus bill, Speaker Nancy Pelosi, states “To put people back to work today and reduce our dependence on foreign oil tomorrow, we will increase renewable energy production and renovate public buildings to make them more energy efficient.” (Emphasis added).
(http://www.dailykos.com/story/2009/2/12/91357/2982/121/696534).

Reading this triggered a couple energy pet peeves of mine. Pet peeve number one is when people say we need to “reduce our dependence on foreign oil” and then use electricity examples as ways of reducing this dependence. Pet peeve number two is when people say we need to “reduce our dependence on foreign oil” and ignore that Canada is a very friendly foreign nation that we share a very long border with and is our nation’s biggest foreign oil supplier. And, in fact, supplies well over 50% of Minnesota’s oil.

These are pet peeves for me for several reasons. First, reducing our oil dependence, no matter where it comes from has merit. So, why blast foreign oil? The obvious answer is that many oil-producing countries around the world are not our friends and buying their product is not in our best interests. Yet, as I just mentioned our largest foreign supplier of oil comes from our friendly neighbor. Thus, what one should say is that “we should reduce our dependence on oil, especially oil from unfriendly countries” or something like that.

Second, oil is a transportation fuel that we use in our cars, planes and trucks. Electricity has yet to become a significant transportation fuel; instead it is used to power our TVs, light our lamps and provide the juice for air conditioning. Thus, while it could be theoretically appropriate to suggest that we can reduce our dependence on foreign oil by using electricity as a transportation fuel, this is not what Speaker Pelosi meant. Or, if it is, then the package she claims will not only jump-start the morbid economy but also will “reduce our dependence on foreign oil” is misguided.

The economic stimulus bill that the Congress passed yesterday allocates about $61 billion to energy-related activities, $29 billion for roads and bridges and $16 billion for transit and high-speed rail. According to Speaker Pelosi’s summary, the $61 billion for energy related activities would be used to:
• Transform the nation’s electricity systems through the Smart Grid Investment Program to modernize the electricity grid to make it more efficient and reliable;
• Support U.S. development of advanced vehicle batteries and battery systems through loans and grants so that America can lead the world in transforming the way automobiles are powered;
• Help state and local governments make investments in innovative best practices to achieve greater energy efficiency and reduce energy usage;
• Spur energy efficiency and renewable energy R&D;
• Provide tax incentives for renewable energy and energy efficiency over the next 10 years;
• Provide grants of up to 30 percent of the cost of building a new renewable energy facility to address current renewable energy credit market concerns;
• Promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation;
• Provide a tax credit for families that purchase plug-in hybrid vehicles of up to $7,500 to spur the next generation of American cars;
• Provide money to improve the energy efficiency of more than 1 million modest-income homes through weatherization;
• Provide money for increasing energy efficiency in federally-supported housing programs;
• And lots of other stuff

Except for battery R&D and tax credits for plug-in hybrid cars, all this money goes towards renewable electricity and energy efficiency. As such, Speaker Pelosi is wrong; it will not reduce our dependence on oil especially from hostile countries.

Perhaps I should cut Speaker Pelosi some slack. Perhaps, I should chalk her description up to standard political rhetoric of destroyed metaphors, sloganeering and sloppy editing.

OK, I’ll do that….but a nagging question remains: in a bill this loaded with programmatic goodies (that should have been vetted by the usual appropriations process, but that’s another pet peeve), why isn’t there more money specifically devoted to reducing our dependence on oil?

Of course, I don’t know but I will postulate three theories. One theory is that the Congress correctly concluded that the biofuels issue has been handled through the Renewable Fuels Standard of the Energy Independence and Security Act of 2007. Another theory is that Federal lawmakers feel that they have done all they can to help the transportation sector with the money they gave General Motors and Chrysler a couple months ago. A third theory is that the DC policy makers realize that dealing with the transportation sector (cars, fuels, etc.) is hugely complex and requires a comprehensive and not the piecemeal approach of the stimulus package.

Whatever the reason for this unusual but wise case of Congressional forbearance; its an example of forbearance Minnesota could learn from.

California Dreamin’

2009-02-11T07:56:00.000-08:00

At the end of last year, California approved a plan to implement regulations to limit greenhouse gas emissions in the state. As part of this process, they conducted an economic analysis which concluded that the regulatory plan would significantly reduce greenhouse gas emissions and have a net positive impact on the state’s economy. However, there was a problem. Five independent economists selected by the state to critique the economic analysis disagreed with its conclusions (see Wall Street Journal article below).

Pretending that it will not cost anything to make the enormous changes to our energy system, and way of life, that will be required to significantly reduce greenhouse gas emissions is shortsighted. We need to have a frank discussion about the costs in order to craft effective policies.

But even more concerning is the fact that the costs of California-esque regulations extend far beyond our pocketbooks. Ironically, there will be some real environmental costs to these types of regulations. While it may be convenient to divide the world up into "green" and "brown" jobs, and pass regulations to promote the former, what the regulators fail to realize is that a "brown" job in America gets a heck of a lot browner when it moves overseas.

If we are going to have a frank discussion about energy and the environment then we need to acknowledge this fact: every manufacturing job in America is a green job when compared to that same manufacturing job in China. There isn’t a “green” economy or a “brown” economy. There is only one global economy.

Since 1998, this country has lost over 5 million manufacturing jobs. California accounts for 440,000 of those lost manufacturing jobs, while Minnesota accounts for over 71,000. If this country’s economy is going to recover, we have to start making things again – real things – that have real value. If we are going to take a leadership role on the environment, we are going to have to acknowledge the fact that it makes a lot more sense to promote clean industry in the United States than fuel the growth of dirty industry overseas. Restoring economic growth will need to include manufacturing new clean energy technology, but for the foreseeable future it will also include the manufacture of existing energy technology. We do not need to create false choices. We cannot afford to.

Dividing our country up into red and blue states did not do much to promote the bipartisanship that is required to address our nation’s most serious challenges. Dividing the job market into “green” and “brown” jobs is not going to aid our economic recovery either.

For more: “California's 'Green Jobs' Experiment Isn't Going Well”
http://online.wsj.com/article/SB123336500319935517.html?mod=googlenews_wsj

Don’t put the cart ahead of the horse

2009-02-10T10:36:00.000-08:00

Businesses, and in fact all Minnesotans, are struggling enough in today’s economy without imposing further regulations that will put us at a competitive disadvantage with our counterparts across the nation and world. It makes little sense to pass new regulations until the financial impact is known. That’s just one of the reasons why we oppose enactment of the proposed low carbon fuel standard.

The standard set forth in HF 86/SF 13 could adversely affect our state’s economy by potentially increasing fuel prices for all Minnesotans and destabilizing our fuel supply. As a result, the bill would likely fail to achieve its goal of lowering greenhouse gas emissions.

The proposed standard could restrict the use of Canadian crude oil in favor of lower carbon sources, potentially wasting billions of dollars of investment in infrastructure to bring crude oil from Canada to the Midwest.

The Minnesota economy – read: jobs – should be the priority as lawmakers engage in this debate. Most businesses rely on the transportation system to ship and receive products. This bill could potentially increase those costs at a time when our economy is so fragile.

What will be the impact of a low carbon fuel standard on the state’s economy? What are the environmental and land-use impacts? Will jobs be lost or created? A University of Minnesota study is under way to try and answer these exact questions. Let’s find out the answers to these common-sense questions before venturing into unknown policy.

Government Solutions to Big Problems Usually Don't Work Part 1 of 2

2009-02-06T09:48:00.000-08:00

While there are so many examples of why we need to proceed with caution on government solutions to Climate Change, today’s (February 6th, 2009) STAR TRIBUNE front page story “Treasury Overpaid $78B in bailout”, serves up a cogent, timely reminder to us all. According to the article, the new Inspector General of TARP, Neil Barofsky, Elizabeth Warren, Chairwoman of the Congressional Oversight Panel, and Gene Dodaro, Acting Comptroller General all have significant accountability concerns about TARP funds (this is an understatement!).
(http://www.startribune.com/nation/39179507.html?elr=KArksLckD8EQDUoaEyqyP4O:DW3ckUiD3aPc:_Yyc:aUUsZ)

Not surprisingly, the article reminds us of what we have always known about the longstanding government overpayments to military contractors for hammers, munitions, toilet seats, to all the Medicare and Medicaid fraud cases since their inception in the 1960s, and the list goes on and on. It is no surprise to any citizen that the first segment of the TARP Program initiated by President Bush, and his Treasury Secretary Henry Paulson (whose next job will likely be selling carbon credits under a Cap and Trade Program for Goldman Sachs or Morgan Stanley, the very companies he “bailed out”), would fail. It was rushed through by them and the bi-partisan Congress with no accountability mechanisms. Something simple like: “This money that you receive from the taxpayers of the U.S. cannot be used for CEO or other compensation, bonuses, benefits or trips! You must make it available at low rates to the same citizens who have saved you from your own greed and ineptness!” But who are we to tell the experts anything, just trust them because they know what is best for us. Lastly, what was Mr. Bernanke thinking (or not) when he signed off on this first down-payment bank give-away?

For all the good that government can sometimes do, it is no match for the cleverness, intelligence, entrepreneurial energies, and sometime failings of the private market place. Private market place failings eventually become obvious (Madoff, Banks, Investment Bank greed and deceit, greedy homebuyers and equity investors, carmakers making gas guzzling higher profit SUVs rather than balancing these with higher mileage vehicles for greater customer choice). While not perfect by any means, at least people are punished or, at least held accountable in some way (businesses going broke, losing their homes if they use them as cash machines to live beyond their means, losing their investments if they invested in what was too good to be true, etc.)

Unfortunately, politicians must help voters (that is how they stay politicians), by spending trillions of the voters and future voter's money bailing out enterprises that should be left to fail. After all, how else will people learn not to be greedy, harsh, and unfair unless they are punished, held accountable for their aberrant behavior? How many of us rewarded our children for bad behavior and were shocked when it continued?

Of course, the major difference is that we all take on the risk of the private market place in order to reap its significant rewards. [For those of you depressed about your home’s value or your retirement accounts, remember that the business cycle is meant to cleanse human excesses and will, when it has completed its task, rise again.] There are few things of which I am absolutely sure but this is one of them: what goes up too fast, comes down hard, and after a time, rises again only to reverse itself once again, when driven to excess.

Next week’s posting will focus on tying the common sense mindset laid out here to why we must proceed cautiously and judiciously with any grand schemes, like Cap and Trade to lower green house gas emissions.

Your respectful reactions and comments are always welcome.

Minnesota is Making Progress on Climate

2009-02-05T17:14:00.000-08:00

I read January’s report, Progress in Addressing Climate Change, (See: http://www.state.mn.us/mn/externalDocs/Commerce/Greenhouse_Gas_Emissions_Reduction_Report_012009032551_GreenhouseGasEmissions.pdf)
the biennial greenhouse gas emissions reduction report to the Minnesota Legislature prepared by the Department of Commerce and Pollution Control Agency. It’s an impressive report, telling a very positive and informative story.

It is good that the Senate will be holding a hearing on the report next week since the report documents what the state’s progress reducing greenhouse gas emissions, the status of the state’s GHGs today, and lays a path for achieving the state’s reduction goals.

In 2005, the baseline year, Minnesota emitted 154 million tons of GHGs. The statutory goal is to reduce GHG emissions by 15% below 2005 by 2015 or down to 130.9 GHG emissions. This means a reduction of 23.1 million GHGs from the 2005 level is needed.

First, and most importantly, the report says that “between 2005 and 2006, greenhouse gas emissions from Minnesota sources declined by about 2 million CO2-equivalent short tons,” (page 4). Said another way: in 2006 Minnesota emitted 152.2 million GHGs or 2 million GHGs less than in 2005.

The second thing the report says is that, “Minnesota is roughly on track to meet the 2015 GHG reduction goal” (page 7) established in the 2007 law largely because of the actions the state has already taken. The actions include:
• The enhanced energy efficiency program which will effectively double the amount of energy savings achieved from 2006 levels yielding about 6 million tons of GHG savings by 2015 according to Minnesota Climate Change Advisory Group (MCCAG; see http://www.mnclimatechange.us/MCCAG.cfm);
• The dramatic increase in electricity from renewables from the state’s renewable energy standard will result in about 7.72 million GHG savings by 2015 according to the MCCAG;
• Xcel’s $1Billion Metropolitan Emissions Reduction Projects that converts a couple old coal plants to natural gas will reduce GHG emissions 4.52 million tons per year in 2015; and
• Increases in ethanol and biodiesel usage resulting from our E10 to E20 and B2 to B5 and beyond requirements, which will result in savings of 1.4 million tons of GHGs by 2015.

The aggregate GHG reductions from these four actions will be about 19.65 million tons by 2015. So, to meet the statutory goal of 15% below 2005 levels by 2015 or reduce our annual emissions by 23.1 million tons, we need to make sure we implement the actions already underway and add actions that will achieve 3.45 million tons of reductions….and this does not give us credit for the 2 million tons of reduction achieved so far.

On pages 24-5 of the OES/PCA report there are some very good suggestions for the how to do this. For example they recommend repealing Minnesota’s nuclear moratorium and adopting more energy efficient appliance standards, which the MCCAG says would save 0.8 million tons of GHGs by 2015. But as one digs deeper into the report, the big GHG savings come from two activities recommended by the MCCAG that Minnesota is already working on:
• Improving recycling programs which could result in almost 3 million tons of annual GHG savings in 2015, and
• Better managing of the state’s forests through improved forestation, restocking and reducing the amount of forest lands that are lost to other uses. This could save almost 6 million tons of GHGs by 2015.

These two activities far exceed all the other ideas offered by the MCCAG…yet they are not getting the attention they deserve.

Thus, to summarize: Minnesota’s GHG emissions are already going down; the efforts to meet and exceed the 15% by 2015 reduction goals are already underway through the enhanced energy efficiency program, the renewable energy standard, converting coal to natural gas and increasing the use of biofuels and that the next best opportunities to reduce GHG emissions are by improving recycling and forestry. These are the places that the Legislature needs to focus on.

Don’t Get Outflanked on Greenhouse Gas Regulation

2009-01-30T07:44:00.000-08:00

In the first Gulf War, 18,000 U.S. Marines stood poised to make an assault into Kuwait in what would have been one of largest amphibious invasions in modern history. They drilled daily on how they would approach the Kuwaiti coast. The Iraqi army deployed their forces to make this as difficult as possible. The conflict would be a true clash of arms.

So when the main coalition force slammed into the Iraqi flank from the west, the Iraqis were completely unprepared for that fight.

When I talk to business leaders across the country, they ask me what kind of climate change legislation I think will come out of this Administration and Congress. What I tell them is that we may not have that long, and our forces may be arrayed against the least immediate threat.

Despite all the talk about cap-and-trade legislation, regulation of greenhouse gases ultimately may happen through the Clean Air Act. Earlier this week, the president instructed the Environmental Protection Agency (EPA) to review its decision to deny California’s request to establish its own automobile emission standards to reduce greenhouse gas emissions (known as California Clean Cars Standard). It is widely expected that EPA will reverse its decision.

The U.S. Chamber of Commerce responded by announcing that this puts “the EPA one step closer to making carbon dioxide ‘subject to regulation’ under the [Clean Air] Act.” Regulation of greenhouse gases in this manner would definitely impact traditional point sources like power plants and industrial facilities. But the EPA's proposed rulemaking from last year tells us that future regulation could reach much further, touching every household in America.

Ever since the Supreme Court ruling in Massachusetts vs. EPA, efforts to drive greenhouse gas regulation have been happening in courtrooms and regulatory agencies around the country. There are 47 cases in litigation in 19 states over the issue of regulating CO2 emissions from proposed coal-fired power plants. Whether the debate is in the courtroom, regulatory agency or legislature, businesses need to engage to make sure that policymakers are weighing the true costs and benefits. Don't be caught flat-footed.

For more: http://www.msnbc.msn.com/id/28863356/wid/18298287 “Carbon regulation? Obama clears a path”

Geography Matters….for Corn and Canadian Crude

2009-01-29T11:26:00.000-08:00

This past weekend I made a very cold, windy and reflective journey to Redwood Falls to my mother-in-law’s funeral. My wife and daughters were already there; so it was just me, my iPOD, and the thump of the tires rolling along the snow-swept roads of west-central Minnesota.

As I drove my mind wondered among many unrelated and spontaneous thoughts. Some centered on the 27-odd years I had known Jean and what an important place she had in my heart; some seemed to migrate toward warm vacation spots; and some categorized into yet-to-be-done “To Do” lists.

Somewhere along the drive I reflected on a recent conversation with my daughter about evolution, Charles Darwin and his book, On the Origins of Species. Our conclusion was that although species can survive in isolation, interconnected places are better than isolated, unconnected places because they generally have more species in greater numbers. We also agreed that while we like visiting islands…especially if they are warm…we liked our mid-continent location better because of its four biomes, changing seasons and our easy connection to the rest of the country. Our conversation wandered, but the obvious conclusion is that geography really matters because it directly and indirectly influences so much.

Elsewhere on my drive, I thought of Minnesota-native Tom Friedman’s book, The World is Flat, And, then paradoxically connected that thought to a comment in Daniel Borstin’s book The Discoverers where he said something like, “the greatest threat to human advancement was the illusion of knowledge.” Borstin was referring to the middle ages, when people really did think the world was flat and therefore never sought to explore the planet…at least until Christopher Columbus sailed the ocean blue in 1492…while Friedman, of course, was extolling the interconnectedness of the planet’s economies. Again, geography matters, where it’s topological or psychological.

Along my drive I went by the ethanol plant outside of Winthrop and thought, “how lucky Minnesota is to have that facility; how lucky Minnesota is to have the soil, the rainfall and weather that leads to bountiful corn harvests that supply that plant; and how proud I was to be part of the state with the strongest biofuels programs in the country.” Again, geography matters.

Minnesota is not an island, very far from it. We are connected to our neighbors, our midwestern region and the rest of the country. We sit in the middle of the North America and play host to the continent’s three great watersheds: the Great Lakes, Hudson Bay and Mississippi. It is Minnesota’s interconnected geography that produces the diverse species, the bountiful corn harvests and influential thinkers like Tom Friedman. It is this interconnected geography that led the Midwestern Governors to unite and promote renewables and energy efficiency and are working together to reduce greenhouse gas emissions.

Minnesota’s interconnected geography matters: It makes us who we are, why we are here and why we flourish. Islands are nice places to visit on vacation but they do not have Minnesota’s interconnected strength, diversity and benefits. We are lucky in that way.
Although rich in wind and biomass potential, Minnesota lacks traditional energy fuels; yet our interconnected geography benefits us because we are adjacent to Canada and relatively close to its oil reserves. Those reserves provide over 80% of our gasoline.

“Minnesota has a fortunate geography,” were my thoughts as I rolled through Morton, six miles from Redwood Falls. And, then it occurred to me that there are times when we forget the value of our interconnected geography, erecting walls and barriers that sever those connections and testing Minnesota’s economic vitality. I fear that the potential adoption of a low carbon fuel standard is one of those instances. Adopting such an isolating standard could limit our very important ties to our Canadian neighbors a well as possibly hurting our corn-based ethanol industry. Taking such unilateral action when the cooperative MGA effort is making slow but steady progress and President Obama is taking action on climate issues, would be unfortunate and hopefully will be avoided.

These were thoughts on this journey before I left the island of my car to enjoy the connections of my extended family….who had traveled from across the country to be there. Geography matters because it’s our home.

Cap and Trade: Here We Go Again!

2009-01-28T12:59:00.000-08:00

Maybe it is just my cynical nature, but given the British experience with Cap and Trade permit trading (or free giveaways) and no reduction in C02, I continue to believe that this public policy is the next financial “ponzi scheme” following closely on the heals of the current derivative, collateral debt obligation, free money for everyone Big Corporate-Big Government scheme. Too many Corporations, too many Goldman Sachs/Morgan Stanley, too many California politicians, and eviromentalists supporting the Cap and Trade approach to ghg amelioratiion and too few Americans understanding how it works, or does not! Sound familiar?

If the American people feel very strongly about curtailing global warming in the next 20-50 years, then why doesn’t this odd coalition of Congressman Waxman/Senator Boxer and other politicos, Republicans and Democrats alike, big corporations, and environmental groups propose direct tax increases to limit constituent/consumer energy consumption. Making goods and services more expensive will curtail their use, reducing ghgs. And most of us understand this because it is transparent. When stuff gets too expensive we all consume less of it.

Instead of attacking the rational market that drove oil prices into the mid $100’s/b through strong, world-wide demand, which created huge demand destruction for gasoline when American consumers reduced their consumption by driving a billion miles less in 2008 than 2009, why not learn the important lesson this taught us? Market’s work. They are not perfect, but they are better than government devised programs supported by politicians, big business, and environmentalists.

Make no mistake, Cap and Trade is a ponzi scheme or money machine for government and the businesses who have positioned themselves to benefit from it. Nancy Pelosi, quoted in the January 22nd 2009 San Fransisco Chronicle said:
“I believe we have to because we see that as a source of revenue” (Cap and Trade Bills).

Once again, reinforcing Eisenhower’s farewell dictim: “Beware the military-industrial complex.” This Common Sense Curmudgeon warns you to beware of the politico-enviro-corporate complex behind Cap and Trade. The potential future bailout of this program could dwarf the current economic crisis coinciding, as it absolutely will, with the huge demand for Social Security and Medicare payments by retiring baby boomers (p.s. Government doesn't have the money to cover these liabilities).

Oh sure, business and government couldn’t see that coming either!

For more:
http://www.opinionjournal.com/weekend/hottopic/?id=110009740 “Cap and Charade”
http://greeninc.blogs.nytimes.com/2008/11/19/the-fight-over-money-from-cap-and-trade/ “The Fight over Money from Cap and Trade”

Nuclear energy: Why not now?

2009-01-26T09:55:00.000-08:00

Let me get this straight. New nuclear energy is illegal in Minnesota – actually, if I read the statutes right, we can’t even talk about it. New coal energy also will be curtailed in 2009 due to the moratorium passed by the 2007 Legislature and signed by Gov. Pawlenty. Natural gas is expensive and not fit for use as a base-load power source, not to mention it is illogical to use our primary heating fuel for electricity. Wind is a great resource and we will add plenty of it, but the wind doesn’t blow all the time.

Has anyone considered what will happen when our power needs outstrip the current fleet of power plants? It will happen sooner than you think: Every new plasma TV that’s plugged in underscores the problem.

This year, the Legislature should take a step in the right direction and remove Minnesota’s outdated ban on nuclear energy. That would at least put all of the options on the table as we try to jump-start this economy and hang on to precious manufacturing jobs to Minnesota.

The Danger of Messy Closets & Out Driving Your Headlights.

2009-01-22T17:35:00.000-08:00

As I was watching today’s Senate Energy Committee hearing on the low-carbon fuel standard, I was reminded of a couple words of wisdom that have come my way:

When my Dad was alive he used to tell this family story about me when I was little (I’m pretty sure it was my brother, not me who did this), but anyway, it’s his story: He told me I had to clean my very messy room before I could go out to play; so I cleaned it; after making a cursory inspection, he said I did a good job and out I went for the rest of the day. But later that evening, for some reason, he opened my closet door and out tumbled all my stuff because I had cleaned my room by taking all my mess and throwing it in the closet. Clearly, this wasn’t Dad’s idea of a clean room, so he made clean up the closet and then grounded me. Besides telling this story to embarrass me, my Dad would use the story to point out that solving one problem by creating another one not only comes back to haunt, but really isn’t a solution.

My behind-the-wheel driving instructor spoke the second words of wisdom many years ago when he said, “never out drive your head lights.” Evidently, this pearl of driving wisdom has staying power since my daughter’s driving instructor said the same thing. Of course, the instructors’ message is simple: don’t go faster then you can see because you might crash into something.

I strongly believe action needs to be taken to address greenhouse gas emissions. So, I’m not sure why these thoughts came to me as I watched the nearly three-hour hearing on the low-carbon fuel standard idea. It’s probably because in my 20 years of being involved in public policy making I’ve learned the hard way that when policy makers go faster then their headlights permit them to see where they are going the resulting actions have adverse and unintended consequences creating other problems.

Dealing with GHG emissions is like very few other problems. It affects everything, in everyway. Thus, while adopting a “low-carbon fuel standard” may sound simple. It’s not. There are numerous factual and policy issues that need to be thoughtfully considered before adopting a low-carbon fuel standard:
• What are the economic impacts of such a standard? The University of Minnesota is starting a study to answer that question.
• What should the definition of “low-carbon” be? The life-cycle calculus debate remains wide-open. The Midwestern Governors are working on it, as are the Federal Government and the State of California. But they have not decided yet, let alone agree. One lab’s study may be valid and useful; but it’s hardly a “national” value.
• Are we sure a low carbon fuel standard, whatever it may be, will actually reduce GHGs? This is about reducing global GHGs, right?
• Or, is it the best way to reduce GHGs from the transportation sector?

These strike me as vitally important questions that Minnesota needs, if not to answer, then to thoughtfully work through to reach consensus resolution. And, the answers are unlikely to be come through creative amendment language…that’s another recipe for disaster, sort of driving without headlights. While unfortunately there may be little appetite for patience at the Minnesota legislature, patience is what is called for.

In short, Minnesota legislators should be patient and take the time to get the needed information, understand the ramifications and think through the policy options before rushing to “clean” its climate change room by packing a low carbon fuel standard in it’s closet only to find that it has out run its headlights and crash into a set of painful problems that require more than a good scolding and not be allowed to go out to play for a while.

Cap and Trade: Follow the Money!

2009-01-21T10:12:00.000-08:00

The carbon financers at the two-day Carbon Forum America conference in San Francisco that wrapped up February 27th, 2008 was "déjà vu all over again.” The promises were reminiscent of those made by the two Macs, Fannie and Freddie, many lenders, mortgage brokers and the Wall Street con artists less than 10 years ago about how their products would put every American into a home of their own. All of this was promised without regard to such details as whether they could afford the payments, had a job, etc.

But that's not too surprising. Carbon financers, traders, investors, or dealers—whatever you want to call them—are middlemen, just like the Wall Street Cons, some bankers and mortgage brokers--- who take a cut for crafting deals that reduce greenhouse gas emissions. Thanks to the Kyoto Protocol, and the EU carbon trading system (ETS), they partook in an estimated $60 billion market last year.

You can imagine why they want the US to hurry along. According to the Congressional Budget Office, visions of a $300 billion to$1 trillion carbon market dance like sugar plums in their heads.
Worldwide market trading in CO2 is estimated to raise several trillion by 2015!

It's easy to feel a bit queasy about carbon financers: There's no question they're in it for the money just like the supposed “free-market” bankers who are currently in line for taxpayer handouts!

If there's no cap and trade policy in the US, companies like EcoSecurities, Evolution, and Climate Change Capital that attended the conference will have a lot less business. But most financiers feel good that making a profit can be aligned with reducing CO2 emissions.

"I like a program that encourages people to do a good thing," says Josh Margolis, co-CEO for CantorCO2e. "Good public policy makers will use what motivates people—fear and opportunity—to accomplish the social good."

The argument for a cap and trade policy in the US is basic economics—markets (through buyers and sellers trading) will find the cheapest way to limit the world's use of carbon. This is significant because the task of disentangling ourselves from using fossil fuels and finding new ways to power our lives will be a massively expensive task no matter how you slice it.

And make no mistake, the cost will be borne by each of us---the American energy consumer. Considering the magnitude of current credit crisis, made possible by oblique financial instruments (CDO’s, derivatives, etc.), policy makers need to proceed with extreme caution on imposing a Cap and Trade system without understanding it’s economic implications for taxpayers and investors.

I have been a student of business, politics, and government for 40 years and have never forgotten President Eisenhower’s warning about being suspect of the military industrial complex---of the private market place using government for its own benefit without regard to the taxpayer whose resources are ultimately at risk.

Turning Our Backs on Canada?

2009-01-20T19:45:00.000-08:00

An emerging issue that sits at the crossroads of energy and environmental policy, and one that could have profound consequences for Minnesota, is the debate about the development of the Canadian oil sands. A recent New York Times article (http://www.nytimes.com/2009/01/07/business/07oilsands.html?_r=3&ref=busi) highlights the issues at the heart of this debate.

The Canadian oil sands represent a vital resource in bolstering our country's energy security. Because of the oil sands, Canadian crude oil reserves are second only to Saudi Arabia. For Minnesota, Canadian crude oil currently supplies over 80 percent of the oil that is refined into transportation fuels like gasoline and diesel.

However, some environmental groups in the U.S. and Canada want to halt oil sands production, arguing that the environmental impacts are too great. They believe that cutting off the U.S. market from this resource will help in their efforts to stop oil sands production.

It is foolish to think that by not using this resource in the U.S., the oil sands won't be developed. This view ignores the reality that energy use in developing countries is set to grow exponentially in the future. The article notes that the pipeline network in Canada only takes oil sands production south to the U.S. That may be true today, but it will not be true in the future if the U.S. market is cut off. Canadian crude oil will still be used and the next logical destination is developing countries like China and India that have less efficient industry and lower environmental standards. Meanwhile, the U.S. will have to rely even more on the Middle East for its crude oil supply.

As Canada's largest trading partner and consumer of its oil, we should be working with them and the oil sands industry, not against them, to address environmental concerns while not compromising energy security. Improvements have been made to lessen the environmental impact of oil sands production. We need constructive solutions, not policy threats, that realistically account for our energy needs while working to improve the environment.

Protect environment and economy

2009-01-19T12:49:00.000-08:00

As Minnesotans we take our electricity for granted. Whether we are flipping a switch to turn on a kitchen light, or plugging in a motor to cool refrigerator units in a grocery store, this state has a strong track record of reliable and competitively priced energy. That’s important because a steady supply of reliable, competitively priced energy is vital to our state’s economy.

But there are clouds on the horizon at the State Capitol that could change all of that. This blog, Inside Energy, is intended to alert and educate Minnesotans on the important public policy decisions under debate at the Minnesota Legislature, as well as the current impact of decisions made in the recent past.

The Minnesota Chamber’s No. 1 concern is the proposed cap-and-trade system which proponents suggest will reduce greenhouses gases. Cap-and-trade is intended to gradually reduce the amount of greenhouse gases in air emissions and to use a trading market among businesses to minimize their costs.

The Minnesota Chamber is committed to clean air, and we are committed to preserving jobs so all Minnesotans can continue to enjoy our quality of life. That said, we oppose any cap-and-trade system specific to Minnesota or the Midwest. The facts, as reinforced by science, show that Minnesota “going alone” will have minimal – if any – impact on reducing global air emissions and actually could do quite the opposite while at the same time causing significant job losses.

Climate change is a global issue and must be addressed on national and international levels.

For additional information on the Minnesota Chamber’s environmental policy initiatives at the 2009 Legislature, read “Our perspective: Don’t put Minnesota on an island in tackling greenhouse gases.” Click on http://www.mnchamber.com/news/legislative_update/01-12-09.pdf.

Enjoy the Inside Energy blog. We welcome your participation as we work together to enact policy that will protect our environment and our economy.