Live from Copenhagen

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

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

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

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

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

Cap-and-trade demands international solution

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

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

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

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

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

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

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

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

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

Let's Trust Science to Fix Climate Change

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

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

Here is what was said verbatim:

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

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

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

"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.