Cap and Play: The New Carbon Emissions ('Hand is Quicker than the Eye') Game

http://www.rockymountainnews.com/news/2008/jun/04/cap-and-pay/


Cap and pay - Congress should reject uncertain promise of emissions crackdown

By Rocky Mountain News

Wednesday, June 4, 2008


We are fairly confident that the Climate Security Act, being debated this week in the U.S. Senate, will have at most a negligible impact on global warming.


For one thing, U.S. lawmakers cannot prevent China, India and other developing nations from expanding their industrial economies (nor should they); these growing societies are likely to produce much more carbon-based energy in the next two decades than the projected savings by the United States.


Though the bill is unlikely to pass, the Democratic and Republican presidential front-runners remain enthusiastic about the cap-and-trade process that is its cornerstone. A similar bill is almost certain to reappear next year.


Cap and trade is a recipe for energy rationing, big time. Washington would set a limit on national greenhouse gas emissions beginning at 2005 levels in 2012 and then going down by 2 percent a year from the same '05 base until 2050.

Since electricity production, transportation and manufacturing account for 81 percent of U.S. greenhouse gas emissions, the bill would target those activities - in other words, the heart and soul of our economy. Power plants, fuel refineries and manufacturers would get allowances under the cap (a permit to pollute, if you will) each year. Those seeking to exceed their government- imposed limits could buy credits from other permit holders that have not.
Under the legislation, emissions allowances would be forced downward every year, even as energy demand is expected to rise. As a result, allowances will get more expensive.

The cost of anything produced with fossil fuels will go up. Economists at MIT estimate that by 2015 the Climate Security Act would raise the price of gas by 29 percent, electricity by 55 percent and natural gas by 15 percent. The Congressional Budget Office is not as pessimistic, but still it predicts that a 15 percent cut in greenhouse gas emissions (which would be mandated within a few years of passage) would boost the average household's energy bill by $1,300 a year.
But the truth is that these models - and others that predict virtually no economic impact, or much worse - are educated guesswork. All that can be said with certainty is that carbon-based energy costs will steadily rise; that, after all, is the idea.


These higher consumer costs would percolate through the economy since nearly everything requires energy to be produced. Washington also stands to land a sizable windfall - between $3.3 trillion and $7 trillion over the next four decades, according to bill sponsors. The feds would get the money auctioning emission allowances each year.


Not only will Washington do well in terms of revenue; regulators' powers will be vastly expanded. American families won't be so lucky, since Congress hasn't planned offsetting tax cuts to cushion individuals and businesses from the financial blow.


A revenue-neutral plan pairing legislation with broad-based tax cuts would at least make the bill more palatable. For that matter, most economists will tell you that a straight carbon tax (also offset, we'd hope, with tax cuts elsewhere) makes more sense than cap and trade because the tax is visible and involves smaller transaction costs; a cap-and-trade system would be incredibly complex and its effects largely obscure to the average American.


Someday the United States will transition from a fossil fuel economy, and the ground for it is being laid right now through major investments in research into alternative technologies. But the needed breakthroughs are best fostered by policies that encourage economic growth, not retard it.


Proponents of this legislation are asking Americans to accept a reduction in their living standards for decades, perhaps a significant one, in exchange for an uncertain payoff many decades in the future. That's hardly a bargain.

© Rocky Mountain News

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http://online.wsj.com/article/SB121236237789236363.html?mod=opinion_main_review_and_outlooks

WALL STREET JOURNAL

REVIEW & OUTLOOK


Cap and Spend


June 2, 2008; Page A16


As the Senate opens debate on its mammoth carbon regulation program this week, the phrase of the hour is "cap and trade." This sounds innocuous enough. But anyone who looks at the legislative details will quickly see that a better description is cap and spend. This is easily the largest income redistribution scheme since the income tax.


Sponsored by Joe Lieberman and John Warner, the bill would put a cap on carbon emissions that gets lowered every year. But to ease the pain and allow for economic adjustment, the bill would dole out "allowances" under the cap that would stand for the right to emit greenhouse gases. Senator Barbara Boxer has introduced a package of manager's amendments that mandates total carbon reductions of 66% by 2050, while earmarking the allowances.


When cap and trade has been used in the past, such as to reduce acid rain, the allowances were usually distributed for free. A major difference this time is that the allowances will be auctioned off to covered businesses, which means imposing an upfront tax before the trade half of cap and trade even begins. It also means a gigantic revenue windfall for Congress.


Ms. Boxer expects to scoop up auction revenues of some $3.32 trillion by 2050. Yes, that's trillion. Her friends in Congress are already salivating over this new pot of gold. The way Congress works, the most vicious floor fights won't be over whether this is a useful tax to create, but over who gets what portion of the spoils. In a conference call with reporters last Thursday, Massachusetts Senator John Kerry explained that he was disturbed by the effects of global warming on "crustaceans" and so would be pursuing changes to ensure that New England lobsters benefit from some of the loot.


Of course most of the money will go to human constituencies, especially those with the most political clout. In the Boxer plan, revenues are allocated down to the last dime over the next half-century. Thus $802 billion would go for "relief" for low-income taxpayers, to offset the higher cost of lighting homes or driving cars. Ms. Boxer will judge if you earn too much to qualify.


There's also $190 billion to fund training for "green-collar jobs," which are supposed to replace the jobs that will be lost in carbon-emitting industries. Another $288 billion would go to "wildlife adaptation," whatever that means, and another $237 billion to the states for the same goal. Some $342 billion would be spent on international aid, $171 billion for mass transit, and untold billions for alternative energy and research – and we're just starting.


Ms. Boxer would only auction about half of the carbon allowances; she reserves the rest for politically favored supplicants. These groups might be Indian tribes (big campaign donors!), or states rewarded for "taking the lead" on emissions reductions like Ms. Boxer's California. Those lucky winners would be able to sell those allowances for cash. The Senator estimates that the value of the handouts totals $3.42 trillion. For those keeping track, that's more than $6.7 trillion in revenue handouts so far.


The bill also tries to buy off businesses that might otherwise try to defeat the legislation. Thus carbon-heavy manufacturers like steel and cement will get $213 billion "to help them adjust," while fossil-fuel utilities will get $307 billion in "transition assistance." No less than $34 billion is headed to oil refiners. Given that all of these folks have powerful Senate friends, they will probably extract a larger ransom if cap and trade ever does become law.


If Congress is really going to impose this carbon tax in the name of saving mankind, the least it should do is forego all of this political largesse. In return for this new tax, Congress should cut taxes elsewhere to make the bill revenue neutral. A "tax swap" would offset the deadweight taxes that impede growth and reduce employment. All the more so because even the cap-and-trade friendly Environmental Protection Agency estimates that the bill would reduce GDP between $1 trillion and $2.8 trillion by 2050.


Most liberal economists favor using the money to reduce the payroll tax. That has the disadvantage politically of adding Social Security into the debate. A cleaner tax swap would compensate for the new tax on business by cutting taxes on investment – such as slashing the 35% U.S. corporate rate that is the second highest in the developed world. Then there's the 2001 and 2003 tax cuts, which are set to expire in 2010 and would raise the overall tax burden by $2.8 trillion over the next decade. Democrats who want to raise taxes on capital gains and dividends are proposing a double tax wallop by embracing Warner-Lieberman-Boxer.


All of this helps explain why so many in Congress are so enamored of "doing something" about global warming. They would lay claim to a vast new chunk of the private economy and enhance their own political power.

EIA & EPA Both Find S.2191 Climate Change Bill Would Cost $Trillions in Added Expense: How Could US Senators Conscientiously Do This to Americans?

The U.S. Energy Information Administration & the U.S. Environmental Protection Agency Both Find S.2191 Climate Change Bill Would Impose $Trillions in Added Cost of Living Expenses. How Could U.S. Senators Conscientiously Do This to Americans?












http://www.eia.doe.gov/oiaf/servicerpt/s2191/execsummary.html

Energy Market and Economic Impacts of S. 2191, the Lieberman-Warner Climate Security Act of 2007 (Exec. Summ.)


Energy Information Administration


April 29, 2008


[The Energy Information Administration (EIA), created by Congress in 1977, is a statistical agency of the U.S. Department of Energy.]


This report responds to a request from Senators Lieberman and Warner for an analysis of S. 2191, the Lieberman-Warner Climate Security Act of 2007 and a subsequent analysis request from Senators Barasso, Inhofe, and Voinovich. S. 2191 is a complex bill regulating emissions of greenhouse gases (GHG) through market-based mechanisms, energy efficiency programs, and economic incentives.


...Key Findings


...S. 2191 increases energy prices and energy bills for consumers. Relative to the Reference Case, the price of using coal for power generation, including the cost of holding allowances, is between 161 percent and 413 percent higher in 2020 and between 305 percent and 804 percent higher in 2030 in the S. 2191 cases. The price of electricity is between 5 percent and 27 percent higher in 2020 and between 11 percent and 64 percent higher in 2030 in the S. 2191 cases. Under S. 2191, average annual household energy bills, excluding transportation costs, are between $30 and $325 higher in 2020 and $76 to $723 higher in 2030.


...S. 2191 increases the cost of using energy, which reduces real economic output, reduces purchasing power, and lowers aggregate demand for goods and services. The result is that projected real gross domestic product (GDP) generally falls relative to the Reference Case. Adverse economic impacts generally increase over time as higher cost emissions abatement options are required as emissions caps become more stringent while population and economic activity levels continue to grow. Total discounted GDP losses over the 2009 to 2030 time period range from $444 billion (-0.2 percent) to $1,308 billion (-0.6 percent) across the S. 2191 cases (Table ES3). Similarly, the cumulative discounted losses for personal consumption range from $546 billion (-0.2 percent) to $1,425 billion (-0.6 percent). GDP losses in 2030, the last year explicitly modeled in this analysis, range from $27 billion to $163 billion (-0.1 to -0.8 percent) while consumption losses in that year range from $58 billion to $149 billion (-0.4 to -1.1 percent). Economic impacts are largest when it is assumed that key low-emissions technologies including nuclear, fossil with CCS, and various renewables are not developed and deployed in a timeframe consistent with the emissions reduction requirements and international offsets are not available.


...S. 2191 impacts industrial activity, including manufacturing, to greater extent than it affects the overall economy. Industrial shipments in 2030, excluding services, are reduced by $233 billion to $589 billion (-2.9 to -7.4 percent), with the largest impacts occurring in the Limited Alternatives/No International Case.

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http://www.eia.doe.gov/oiaf/servicerpt/s2191/economic.html

Energy Market and Economic Impacts of S. 2191, the Lieberman-Warner Climate Security Act of 2007 (EIA)


Economic Impacts


Implementing the S. 2191 GHG allowance program will affect the economy through two key mechanisms. First, the cost of using energy, particularly fossil fuels and electricity, will be increased by the requirement to lower total emissions and submit allowances for any ongoing emissions. Second, the auctioning of allowances together with the free distribution of allowances to non-emitting sources will generate revenue that will be spent on programs designed to help businesses and consumers reduce their emissions or ameliorate the impacts associated with higher energy prices.5 However, as the share of allowances auctioned and the price of allowances grow over time in the S. 2191 cases, the revenue to the government that could be redistributed also grows, while the economy slows.


...Real GDP and Consumption Impacts


The higher delivered energy prices lower real output for the economy. They reduce energy consumption, but also indirectly reduce real consumer spending for other goods and services due to lower purchasing power. The lower aggregate demand for goods and services results in lower real GDP relative to the Reference Case (Figure 26 and Table 4). Relative to the Reference Case, real GDP in 2030 is $163 (0.8 percent) lower in the Limited Alternatives/No International Case and $27 billion (0.1 percent) lower in the No International Offsets Case. In the S. 2191 Core Case, real GDP is 59 billion (0.3 percent) lower in 2030. Over the entire forecast period, the cumulative present value GDP loss reaches $444 billion in 2000 dollars (0.2 percent) in the S. 2191 Core Case. The Limited Alternatives/No International Case shows the largest real discounted GDP loss between 2009 and 2030, reaching $1.3 trillion (0.6 percent).


While real GDP is a measure of what the economy produces, the composition of GDP may change considerably between the major components: consumption, investment, government, and net exports. Consumer expenditures, one indicator of consumers’ welfare, show larger relative losses compared to GDP. Figure 27 depicts consumption impacts over time and the cumulative discounted percent change in consumption over the 2009 to 2030 period compared to the Reference Case. The cumulative losses of real consumption are between $558 billion (0.4 percent) in the S. 2191 Core Case and $1.4 trillion (0.6 percent) in the Limited Alternatives/No International Case. By 2030, real consumption losses reach $68 billion (0.5 percent) in the S. 2191 Core Case. The Limited Alternatives/No International Case shows the highest consumption loss, reaching $149 billion (1.1 percent) in 2030.


Industrial Impacts


Industrial energy prices increase more than consumer energy prices since 11 percent of the allowance revenue received by industry is aimed at ameliorating energy price impacts for consumers, 9 percent to electricity load-serving entities and 2 percent to natural gas distributors. As a result, industrial impacts show substantial losses. As energy prices increase, the energy-intensive sectors, including food, paper, bulk chemicals, petroleum refining, glass, cement, steel and aluminum, show greater losses compared to the rest of the industrial sectors, reaching 3.6 percent below the Reference Case by 2030 in the S. 2191 Core Case, and 5.0, 5.3, 6.4 and 10.2 percent in the No International Offsets, High Cost, Limited Alternatives, and Limited Alternatives/No International Cases, respectively. Figure 28 highlights manufacturing industries’ impacts across the S. 2191 cases, separately showing the energy-intensive and non-energy-intensive manufacturing industrial sectors.


Figure 29 shows industrial sector (all non-service industries) and employment impacts for the S. 2191 Core, Limited Alternatives, No International Offsets, High Cost, and Limited Alternatives/No International Cases. In the S. 2191 Core Case, industrial output is down by 2.9 percent compared to the Reference Case in 2030 as higher prices and lower demand leads industrial output to fall. Manufacturing employment changes mirror industrial impacts.


Uncertainty


All long-term projections engender considerable uncertainty. It is particularly difficult to foresee how existing technologies might evolve or what new technologies might emerge as market conditions change, particularly when those changes are fairly dramatic. Under S. 2191, this analysis finds energy providers, particularly electricity producers, will increasingly rely on technologies that currently play a relatively small role or have not been built in the United States in many years. Sensitivity analyses suggest that the economic impacts can change significantly under alternative assumptions regarding the cost and availability of new technologies and the availability of offsets.

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http://epa.gov/climatechange/downloads/s2191_EPA_Analysis.pdf

EPA Analysis of the Lieberman-Warner Climate Security Act of 2008 S. 2191 in 110th Congress


March 14, 2008


On November 9, 2007 Senators Lieberman (Ind) and Warner (Rep) requested that EPA estimate the economic impacts of the S. 2191, the “Climate Security Act of 2007” (the “Lieberman-Warner Climate Security Act of 2008”). S. 2191 places declining greenhouse gas (GHG) emission caps upstream on petroleum, natural gas, as well as manufacturers of fluorinated gases (F-gases) and N2O and downstream on coal facilities...The analysis was conducted by EPA’s Office of Atmospheric Programs.


The main conclusions are as follows:

The US economy is robust enough to withstand the high oil prices, the credit crises and other similar hurdles. By 2030, GDP and consumption are projected to increase 97% from 2007 levels in the Reference Scenario. By 2050, the projected increase in GDP and consumption from 2007 levels is 215% (see page 3).


However, the US economy cannot elude the adverse impacts of S. 2191. Under S.2191, GDP is modeled to be between 0.9% ($238 billion) and 3.8% ($983 billion) lower in 2030 and between 2.4% ($1,012 billion) and 6.9% ($2,856 billion) lower in 2050 than in the Reference Scenario. Consumption is modeled to be between 0.9% ($180 billion) and 1.4% ($233 billion) lower in 2030 and between 2.1% ($670 billion) and 3.3% ($843 billion) lower in 2050 than in the Reference Scenario. The average annual growth rate of consumption is ~0.08 percentage points lower than the reference case. In 2030 per household average annual consumption is ~$1,375 lower and gasoline prices increase ~$0 .53 per gallon. In 2050 per household average annual consumption is ~$4,377 lower and gasoline prices increase ~$1.40 per gallon. Electricity prices are projected to increase 44% in 2030 and 26% in 2050 (see page 3).


...Key Results & Insights


...Under S.2191, GDP is modeled to be between 0.9% ($238 billion) and 3.8% ($983 billion) lower in 2030 and between 2.4% ($1,012 billion) and 6.9% ($2,856 billion) lower in 2050 than in the Reference Scenario. Consumption is modeled to be between 0.9% ($180 billion) and 1.4% ($233 billion) lower in 2030 and between 2.1% ($670 billion) and 3.3% ($843 billion) lower in 2050 than in the Reference Scenario.


The average annual growth rate of consumption is ~0.08 percentage points lower than the reference case. In 2030 per household average annual consumption is ~$1 ,375 lower and gasoline prices increase ~$0 .53 per gallon . In 2050 per household average annual consumption is ~$4,377 lower and gasoline prices increase ~$1.40 per gallon.


Electricity prices are projected to increase 44% in 2030 and 26% in 2050, assuming the cost of allowances can partially be passed on to consumers (as is the case in a full auction). If allowances are given directly to power companies, the cost of those allowances would not be passed on to consumers in regulated electricity markets, so electricity price increases would be smaller in much of the country. (p. 3).


...If international credits are not allowed (or are more expensive than U.S. GHG allowances), and domestic offsets are still limited to 15%, then allowance prices increase by 34% compared to the bill as written.


If domestic offsets and international credits are not allowed, and the caps must be met solely through emissions reductions in covered sectors, then allowance price increases by 93% compared to the bill as written.
(p.6).


...Fuel Prices (ADAGE)


...S. 2191 electricity prices are 44% higher than in the Reference Scenario in 2030 and 26% higher in 2050, reflecting a shift in fuel mix from coal to gas in the earlier years, the adoption of carbon capture and storage technology in la ter years, and the in creased prices the consumers of coal and gas face due to th e price of allowances.


...Electricity prices in the S. 2191 case under alternative reference assumptions are 35% higher in 2030 and 28% higher in 2050 than the Alternative Reference Scenario prices.

• With assumptions that limit the growth of nuclear, biomass, or carbon capture and storage technologies, meeting the cap becomes more expensive, resulting in larger reductions in demand and increases in the costs of traditional fossil fuels as generators must purchase additional allowances. If all three technologies are constrained, electricity prices in 2030 are 79% higher and 2050 prices are 98% higher than the reference scenario prices.
(p. 57).

...The cost of the carbon content increases the price of gasoline by 21%, increases the price of oil by 47%, increases the price of natural gas by 57%, increases the price of coal by 360%, and increases the price of coal used with CCS by 36%.
(p. 58 - "Results: Scenario 2 - S. 2191 Fuel Price Adders for 2030 ( ADAGE)").

...[SEE ALSO:] Appendix 4: Additional Information
(pp. 153-164).

Holy Hypocrisy!! UK Proselytizes About Climate Change, But Can't Even Meet its Own Carbon Commitments!

http://www.timesonline.co.uk/tol/news/environment/article4009254.ece

UK CO2 emissions rise faster than EU average despite carbon-trading scheme

By David Charter

Times Online

May 27, 2008

Britain pumped out more greenhouse gases last year under the EU carbon trading scheme designed to cut emissions, according to figures released in Brussels.

The British increase was 2.2 per cent. There was an overall increase across Europe of 0.68 per cent, or 16million tonnes of CO2. Emissions rose in ten of the EU's 27 countries, including Germany and Spain, despite the scheme's target to cut CO2 by a fifth by 2020.

Ministers argued that the extra 5.4 million tonnes of CO2 produced in Britain could be more than explained by 59 organisations joining the trading scheme, in which polluters are given carbon credits and forced to buy more if they emit beyond their allocation.

They added that when the scheme is revamped next year, there will be tougher controls on the number of credits available. Phil Woolas, the Environment Minister, said that without the new entrants into the scheme, emissions would have gone down by 2.9 million tonnes. “Companies are taking their responsibilities seriously and carbon reduction and trading has become a normal part of their business,” he said.

But environmental campaigners said that the figures, combined with plans for more coal-fired power stations, showed that the carbon-trading scheme was not tough enough to meet reduction targets.

“The only thing that matters is how much CO2 is going into the atmosphere,” said Robin Oakley, head of Greenpeace's climate campaign. “It does not sound credible to call the emissions-trading scheme a success when we have seen a proposal for a new coal-fired power station in Kent. It is not sending a strong enough signal to the power companies.”

Stavros Dimas, the EU Environment Commissioner, said that the rise in emissions was below the 2.8 per cent rise in Europe's GDP last year. “Emissions trading is yielding results,” he said. “Studies show that emissions would most likely have been significantly higher without the EU emission trading scheme.”

The biggest rises in tonnage of CO2 in 2007 came in Germany (up 8.99 million tonnes), Spain (up 6.79 million tonnes), Britain (up 5.42 million tonnes) and Czech Republic (up 4.21 million tonnes).

Yesterday a committee of MPs told the Government to go ahead with a system of personal “carbon credits”.

Under the scheme everybody would be given an annual carbon limit. Anyone who wanted to spend more could buy extra credits from low-carbon emitters.

The Environmental Audit Committee said it would be more effective than green taxes and would promote behavioural change. It admitted that there would be strong public opposition but urged the Government to be courageous.

Lieberman-Warner Global Warming Bill Adopts Very Costly, Unproven European Socialist Regulatory Model at Expense of U.S. Consumers, New Report Finds

http://www.heritage.org/Research/EnergyandEnvironment/wm1940.cfm

Five Myths About the Lieberman-Warner Global Warming Legislation (S. 2191)


by Ben Lieberman


Heritage Foundation WebMemo #1940 (May 30, 2008)


Myth #1: LW would not be expensive.
"...By restricting carbon dioxide emissions from coal, oil, and natural gas--with a freeze at 2005 levels beginning in 2012, to a 70 percent reduction in 2050--the bill forces down supply and thus boosts the price of energy...Cumulative gross domestic product (GDP) losses could reach $4.8 trillion by 2030...



Myth #2: The costs fall on industry, not consumers.

...Particularly hard hit is the manufacturing sector where over one million jobs will be lost by 2022 and two million by 2027. The losses in household incomes could reach $1,026 per year by 2015. Annual household energy-price increases could hit $1,000 by 2030, including a 29 percent increase in the price of gasoline from 2008 levels.


Myth #3: Global warming is a crisis that must be addressed at all costs.

Global warming is a concern, not a crisis. Both the seriousness and the imminence of the threat are overstated... Overall, current and expected future temperatures are far from unprecedented, and are highly unlikely to lead to catastrophes.


Myth #4: LW effectively addresses the threat of climate change.

China has overtaken America as the world's largest emitter, and its emissions growth is several times greater than that of the U.S. India and other fast-developing nations are on a similar trajectory. Thus, the unilateral impact of the bill on global emissions would be inconsequential.






Myth #5: LW's cap-and-trade approach is a proven success.


Most E.U. nations are not on track to meet their targets, and many are seeing their emissions rise faster than those in the U.S. The program is furthermore plagued by accusations of fraud and unfairness. LW essentially adopts the European approach wholesale."

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http://www.europa-eu-un.org/documents/en/070531_eu_action_against_climate_change.pdf

EU action against climate change: Leading global action to 2020 and beyond


© European Communities, 2007


"The February 2007 science report from the Intergovernmental Panel on Climate Change (IPCC)1 shows that the world has warmed by an average of 0.76º Celsius since pre-industrial times and the temperature rise is accelerating. Sea levels rose almost twice as fast between 1993 and 2003 as during the previous three decades. Man-made emissions of greenhouse gases are causing these changes.


The IPPC projects that, without action to limit emissions, the global average temperature is likely to increase further by 1.8º to 4ºC this century. We cannot allow this to happen. The European Union considers it vital to prevent global warming of more than 2ºC above the pre-industrial level.


There is considerable scientific evidence that, beyond this threshold, irreversible and potentially catastrophic changes could occur. In March 2007 EU Heads of State and Government endorsed an integrated climate change and energy strategy put forward by the European Commission which outlines the EU’s proposals for a global and comprehensive agreement to combat climate change after 2012, when the Kyoto Protocol targets will expire.


[READERS SHOULD NOTE THAT IT DOESN'T SAY 'CONCLUSIVE SCIENTIFIC EVIDENCE!].


The Commission’s analysis shows that for the world to have a fair chance of keeping the average temperature rise to no more than 2ºC, global emissions of greenhouse gases will have to be stabilised by around 2020 and then reduced by up to 50% of 1990 levels by 2050.


...The European Commission’s analysis shows that the investment needed to achieve a low-carbon economy would cost only around 0.5% of world GDP between 2013 and 2030. According to its projections, taking action against climate change would reduce global GDP growth by just 0.14% per year up to 2020. Global GDP growth over the period 2005-2020 would be 53%, barely lower than the 55% growth projected if no action were undertaken. And this figure does not take account of the benefits of cutting emissions, such as reduced damage from avoided climate change, greater energy security, and healthcare savings from less air pollution.

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http://www.heritage.org/Research/EnergyandEnvironment/cda08-02.cfm


The Economic Costs of the Lieberman-Warner Climate Change Legislation


by William W. Beach, David Kreutzer, Ph.D., Ben Lieberman and Nick Loris

Center for Data Analysis Report #08-02


May 12, 2008

"...S. 2191 imposes strict upper limits on the emis­sion of six greenhouse gases (GHGs) with the pri­mary emphasis on carbon dioxide (CO2). The mechanism for capping these emissions requires emitters to acquire federally created permits (allowances) for each ton emitted. The cost of the allowances will be significant and will lead to large increases in the cost of energy. Because the allow­ances have an economic effect much like the effect of an energy tax, the increase in energy costs creates correspondingly large transfers of income from pri­vate energy consumers to special interests.




...We use these two cases to bracket our cost projections of S. 2191:


- Cumulative gross domestic product (GDP) losses are at least $1.7 trillion and could reach $4.8 tril­lion by 2030 (in inflation-adjusted 2006 dollars).


- Single-year GDP losses hit at least $155 billion and realistically could exceed $500 billion (in inflation-adjusted 2006 dollars).


- Annual job losses exceed 500,000 before 2030 and could approach 1,000,000.


- The annual cost of emission permits to energy users will be at least $100 billion by 2020 and could exceed $300 billion by 2030 (in inflation-adjusted 2006 dollars).


- The average household will pay $467 more each year for its natural gas and electricity (in infla­tion-adjusted 2006 dollars). That means that the average household will spend an additional $8,870 to purchase household energy over the period 2012 through 2030.


Our analysis does not extend beyond 2030, at which point S. 2191 mandates GHG reductions to 33 percent below the 2005 level. However, it should be noted that the mandated GHG reductions con­tinue to become more severe and must be 70 per­cent below the 2005 level by 2050.


...Since income (as mea­sured by GDP) drops as a result of S. 2191, it is clear that more capital is destroyed than is cre­ated. The cumulative GDP losses for the period 2010 to 2030 fall between $1.7 trillion and $4.8 trillion, with single-year losses reaching into the hundreds of billions.


...With S. 2191, there is an initial small employ­ment increase as firms build and purchase the newer more CO2-friendly plants and equipment. However, any "green-collar" jobs created are more than offset by other job losses. The initial uptick is small compared to the hundreds of thousands of lost jobs in later years. Table 1 shows the high and low projections of the employment and income effects of S. 2191.




...Distribution of Auction Proceeds


S. 2191 specifies how the distribution of the auction proceeds will be spent, with constant percentages from 2012 to 2036. The auction process depends on the creation of a new nonprofit corporation called the Climate Change Credit Corporation to initiate and complete the auctioning of allowances.


Eleven percent will be allocated to an advanced-technology vehicles-manufacturing incentive. While 44 percent is to be spent on low-carbon energy technology, advanced coal and sequestration programs, and cellulosic biomass ethanol technology programs, 45 percent is to be spent on assisting individuals, families, firms, and organizations in the transition to a low-carbon regime. This includes 20 percent allocated to an Energy Assistance Fund, 20 percent allocated to an Adaptation Fund, and 5 percent allocated to a Climate Change Worker Training Fund.


...Proponents of cap and trade describe it as a flexible and market-based approach that allows the private sector to find the most cost-effective means of reducing greenhouse gas emissions. They expect the program to motivate fossil energy producers and users to reduce their car­bon dioxide emissions through improvements in energy efficiency, expanded use of energy sources with fewer or no carbon emissions, or new carbon capture and sequestration (CCS) technologies that allow such emissions to be stored underground rather than released into the atmosphere.


...In contrast, critics fear that many of the necessary advances are decades away from being technologi­cally and economically viable and that, in the interim, the caps in S. 2191 can be met only with severe reductions in energy use, which would drive up energy costs significantly--and would be, in effect, a massive energy tax.


...Critics also point to the substantial difficulties that the European Union has faced since imple­menting its greenhouse gas cap-and-trade program in 2005 in order to comply with the Kyoto Protocol, the multilateral treaty on emissions that the United States declined to ratify.


...In addition to the provisions of the bill, the many baseline assumptions about the future also affect the projected costs of S. 2191. They include assump­tions about the pace of technological advances, especially those regarding the CCS breakthroughs that will be necessary for the continued use of coal, the energy source with the highest CO2 emissions per unit of energy. Continued use of coal is critical because it provides half of the nation's electricity. Assumptions about America's economic growth and concomitant energy needs are also of great importance, as are assumptions about the effect of previously enacted energy legislation, particularly the Energy Independence and Security Act of 2007.


...The Simulations


This CDA report discusses three different views of this country's economic future, each shaped by different policies designed to reduce atmospheric carbon dioxide and, presumably, to reduce the warming trend in global climate change. Policy­makers and others who follow the climate change debate closely should find each of these three views helpful in understanding the policy alternatives cur­rently before us. These three views are:


- The current-law baseline. Presented here is a highly detailed, 30-year economic forecast that incorporates the principal elements of energy and climate change policies signed into law last year.


- Simulation of S. 2191, America's Climate Secu­rity Act of 2007, sponsored by Senators Joseph Lieberman (I-CT) and John Warner (R-VA). The simulation builds on the detailed baseline and assumes that critical technologies are fully developed.


- An alternative, more realistic scenario in which critical technology does not materialize over the 20-year forecast horizon...


Baseline --


...Natural Gas. In the baseline scenario, gas prices settle just below $7 per million British thermal units (Btus). This is less than the current price but well above the 1990s levels. Alaskan pipeline deliveries will not start until 2025, at which point they will help to offset supply reductions in the Lower 48 as well as imports from Canada. Nearly 100 gigawatts of old natural-gas-steam capacity is retired, and 50 gigawatts of the more effi­cient "natural gas combined cycle" (NGCC) plants are built. Total natural gas consumption grows by 0.4 percent per year through 2030.


Coal. In the baseline case, coal use is restrained by slower growth of energy demand and increas­ing generation of nuclear and renewable power. Demand will grow by an average of 0.2 percent each year through 2030. One hundred gigawatts of old inefficient energy is retired. Sixty-five gigawatts of new and replace­ment coal-fired power-generation plants will be added using the "integrated gas combined cycle" (IGCC) or advanced pulverized-coal technolo­gies. These more efficient technologies use less coal and emit less CO2 per unit of electricity gen­erated and are ready to be fitted for carbon cap­ture and sequestration. Because of the additional cost, there is no use of CCS technology in the baseline case.


...Nuclear Energy. Though there are no significant CO2 emissions from nuclear power generation, it is not considered "renewable" for the purpose of meeting existing state-imposed targets. Neverthe­less, federal incentives are already in place for an additional nuclear power capacity. There will be 12 gigawatts of new capacity built and 3 gigawatts of uprated additional capacity added at existing plants. Resolving the problems with waste disposal is a major hurdle in expand­ing nuclear power generation.


...Renewable Energy Sources. Federal and state initiatives already in place seek to increase the use of renewable energy sources. The definition of "renew­able" varies from state to state but generally in­cludes biomass, wind, and solar power. Higher fuel prices along with state and federal mandates cause renewable fuel use to grow at 5.5 percent per year through 2030.


...Lieberman-Warner --


S. 2191 sets ever more stringent caps on emissions of these gases. Using previous emission levels as yard­sticks, the 2012 cap is set at the 2005 emission level. The cap drops to 15 percent below the 2005 emission level by 2020 and 33 percent below by 2030. By 2050, the goal is to have man-made GHG emissions at 70 percent below those of 2005.


...Barriers to Trade: Title VI, Global Effort to Reduce Greenhouse Gas Emissions


Title VI of S. 2191 is part of a global effort to reduce greenhouse gas emissions and ensures that emitting GHG in other countries does not undermine U.S. efforts to reduce GHG. The bill's supporters hope to encourage international action on GHG reduction.


To this end, the bill includes the suggestion that the President establish an interagency group to determine whether or not other countries have taken similar action to limit their release of GHG. The interagency group will be responsible for creating a reserve of international allowances, and any U.S. importer of covered goods must submit international allowances as a condition for the trade to occur.


Thus, importers of covered goods must submit emissions allowances that are equal in value to those required for those goods in our system. For instance, if the production of a product generates two tons of CO2 , importers of this product need two tons of allowances for each product they import.


An importer must also submit a written declaration to the administrator of U.S. Customs and Border Protection for each import. Failure to make a CO2 emissions declaration bars the importation of a good into the United States.


...Coal Technology... The costs of meeting the CO2 reductions man­dated by S. 2191 are very sensitive to changes in the rate at which CCS technology is developed. Our generous scenario operates on the assump­tion that any coal-fired plant built after 2018 uses CCS. A second scenario assumes that the signifi­cant technological and political hurdles prevent CCS adoption before 2030.


...Natural Gas. Because of its higher cost, natural gas is not competitive with coal in the baseline case of zero CO2 restrictions. Though natural gas gener­ates less CO2 per Btu than does today's coal, it is not competitive when coal generators use CCS...For carbon-allowance prices in the $30 to $40 range, replacing old steam plants with combined-cycle natural gas plants makes sense. When allow­ance prices exceed $50, coal plants with CCS are more competitive.


...Nuclear Energy. The projection is for no addi­tional nuclear power beyond the base case.


...Renewable Energy Sources. Current state and federal legislation calls for more than tripling the amount of renewable energy in power generation and increasing transport biofuels by more than 1,000 percent. This includes 16 billion gallons per year of corn-based ethanol and biodiesel and 20 bil­lion gallons per year of cellulosic ethanol and biodie­sel...While S. 2191 has no additional mandates for biofuels, the costs of allowances for fossil fuels lead to greater use of biofuels. At this time, there is no commercially feasible cellulosic ethanol pro­duction. If this technology fails to deliver as pro­jected, energy prices will have to rise enough to reduce the quantity of energy demanded by the amount of missing cellulosic ethanol.


...Economic Costs of the Lieberman-Warner Bill


Economic Output Declines.


...Th[e] investment-driven burst of GDP subsides after 2018. Higher energy prices decrease the use of car­bon-based energy in production of goods, incomes fall, and demand for goods subsides. GDP declines in 2020 by $94 billion, in 2025 by $129 billion, and in 2030 by $111 billion (all, again, after inflation). When CCS is not implemented, the higher carbon fees produce more adverse economic effects. GDP is $330 billion below its baseline levels by 2025 and $436 billion below its baseline levels by 2030.


...[M]an­ufacturing benefits from the initial investment in new energy production and fuel sources, but the sector's declines are sharp thereafter. Indeed, by 2020, manufacturing output in this energy-sensitive sector is 2.4 percent to 5.8 percent below what it would be if S. 2191 never becomes law. By 2030, the manufacturing sector has lost $319 billion to $767 billion in output when compared to our baseline; that is, when compared to the eco­nomic world without Lieberman-Warner.


...Number of Jobs Declines.


...In 2025, nearly a half-million jobs per year fail to materialize. The job losses expand to more than 600,000 in 2026. Indeed, in no year after the boomlet does the econ­omy under Lieberman-Warner outperform the base­line economy where S. 2191 never becomes law...Our baseline contains a 9 percent decline between 2008 and 2030. Lieberman-Warner accelerates this decrease substantially: Under our generous-assump­tions simulation, employment in manufacturing declines by 23 percent over that same time period, or more than twice the rate without Lieberman-Warner...Other, less energy-intensive sectors, however, do not suffer such decreases.


...Energy Prices Rise.


...Higher energy prices, of course, are the root cause of the slower economy...[C]onsumer prices for electricity, natural gas, and home heating oil increase signifi­cantly between 2015 and 2030. Indeed, by the last year of our simulation, the total energy bill for the average American consumer has gone up $8,870 from 2012.


Incomes and Consumption Decline.


Declining demand for energy-intensive products reduces employment and incomes in the businesses produc­ing these products. Workers and investors earn less, and household incomes decline. Reductions in income in these sectors spread and cause declines in demand for other sectors of the economy.


Our simulation captures this effect of higher energy prices. Under the generous-assumptions simulation, the income that individuals have after taxes declines by $47 billion (after inflation) in 2015 and by $50.7 billion in 2030. Our reasonable-assumptions simulation contains worse news: Dis­posable personal income falls $120 billion below baseline in 2015 and averages $68 billion below baseline over the entire period of 2008 to 2030.


Consumption outlays by individuals and house­holds follow the pattern of lower income. In 2020, consumption expenditures are $52 billion lower than they would be in an economic world in which S. 2191 is not the law. Personal consumption outlays (after inflation) are $67 billion lower by 2030 and average $54 billion below baseline over the entire 22-year forecast period. Under a more reasonable assessment of the likelihood of standard use of CCS, consumption expenditures by individuals average $113 billion lower over the 22-year forecast period.


These declines in consumption are particularly dramatic in those parts of the economy that are sensitive to economic shocks: con­sumer durables, financial services, and discretionary medical services, among others."

EU Energy Entrepreneurs Experience Economic Epiphany Exposing Elusive Emissions Endgame

http://www.enn.com/climate/article/31567

Power Users Warn EU Investment Stalls Over Climate

From: Reuters Published February 21, 2008 11:41 AM

By Huw Jones and William Schomberg

BRUSSELS (Reuters) - Energy-intensive industries in Europe warned on Thursday that big investment decisions are being put on hold until the European Union hammers out its plan for fighting climate change after 2012.

A month after the EU's executive announced proposals to curb greenhouse gas emissions in the 27-nation bloc, executives from some of Europe's biggest companies said they could not afford to wait long for details of how the system will work.

Juha Rantanen, chief executive of Finnish stainless steel company Outokumpu, said the EU's Emissions Trading Scheme, which will make companies pay increasingly for their pollution, was already hitting his company's plans to expand mining of ferrochrome, a stainless steel ingredient."With not knowing what the price of electricity will be beyond 2012, or what will be the price of emissions rights, we are not making that investment and instead we buy ferrochrome from South Africa and Kazakhstan, where it's being produced in an environmentally less efficient way," he told Reuters.

"This trading scheme puts a cost into operations in Europe which is higher than for competitors in other regions. That will ultimately lead to European industry investing less in Europe."

Jean-Pierre Clamadieu, CEO of French chemicals group Rhodia , noted that French cement maker Lafarge had recently suspended its investments in plants in the EU and said Rhodia might face a similar dilemma in the near future.

"It is important we get as quickly as possible visibility on (the EU plans)," Clamadieu said. "If we don't, then I think there will be lot of investment project delay or investment which will move to different regions of the world."

DECISION DEFERRED

EU governments aim to agree on a post-2012 reform of the Emissions Trading Scheme by the end of this year, but the Commission wants to defer the question of special treatment for energy-intensive industries until 2010.

The outcome will depend on whether there is an international agreement on curbing greenhouse gas emissions, blamed for global warming, it argues.

Addressing the same conference on climate change and business, European Commission President Jose Manuel Barroso pledged again that if there were no global solution,

the EU would look at interim measures such as free emissions permits for energy-intensive industries.

Other executives voiced concern that Europe's ambitious plans to cut greenhouse gas emissions would hurt the competitiveness of industry.

The United States, the world's biggest economy, rejects the idea of mandatory emissions caps and major developing economies, such as China and India, say it is unfair to ask them to make big emissions cuts after centuries of pollution by richer countries.

U.S. Ambassador to the EU Boyden Gray suggested Europe should delay its ambitious targets for cutting emissions from 2020 until 2030 to allow time for technology to develop.
European industries that are the biggest consumers of power want special treatment under the new rules.

Michel Wurth, who sits on the management board of the world's biggest steelmaker, ArcelorMittal, said companies like his wanted know how the EU would define energy-intensive industries, what proportion of emissions rights they would have to pay for and how much funding they would get to finance research into cleaner manufacturing and new products.

"Today the European steel industry is at the top in terms of energy efficiency so if you force European steel to reduce or get out of production, the consequence will be the global steel industry will emit more than it does today," he said.

ArcelorMittal recently agreed to keep open a blast furnace in Liege, Belgium, until 2012 but possibly not longer due to the uncertainties about the next phase of the EU energy rules after that date, Wurth said.

(Additional reporting by David Lawsky, editing by Anthony Barker)

US Energy Law Can Penalize ‘Commercially Available’ Canadian Fuel’, Raise US Consumer Energy Prices, Jeopardize US Energy Security & Trigger Trade War

http://www.ft.com/cms/s/0/3310a3d0-ee0d-11dc-a5c1-0000779fd2ac.html


Canada warns US over oil sands

By Sheila McNulty in Houston

Financial Times

Published: March 9 2008


Canada has warned the US government that a narrow interpretation of new energy legislation would prohibit its neighbour buying fuel from Alberta’s vast oil sands, with “unintended consequences for both countries”.


In a letter to Robert Gates, US defence secretary, Canada said that it “would not want to see an expansive interpretation” of the Energy Independence and Security Act 2007. A copy of the letter, from Michael Wilson, Canadian ambassador, and copied to Condoleezza Rice, US secretary of state, and Samuel Bodman, US energy secretary, has been obtained by the Financial Times.
See http://www.ft.com/cms/67ed53dc-edfe-11dc-a5c1-0000779fd2ac.pdf


Section 526 of the law limits US government procurement of alternative fuels to those from which the lifecycle greenhouse gas emissions are equal to or less than those from conventional fuel from conventional petroleum sources. Canada’s oil sands are considered unconventional fuels, and producing them emits more greenhouse gas than conventional production.


The Bush administration has, nonetheless, encouraged developing oil sands, given the US’s favourable relationship with Canada and that it would reduce reliance on Middle East imports.


Amy Myers Jaffe, energy expert at Rice University, said cutting out the oil sands as a source of fuel would also limit global supplies further, forcing up the price of oil: “$106 a barrel is going to look cheap.”


The three presidential candidates hoping to replace President George W. Bush are proponents of strong US policy to counter greenhouse gas emissions, which could lead to a narrow interpretation of the law. That could be why Canada wants the law interpreted now.


“The Canadians do, in fact, have something to worry about, particularly from a Democratic administration,” Ms Jaffe said.


Environmentalists say extracting a barrel of crude from oil sands results in five times the amount of greenhouse gas emissions than extracting conventional crude – a figure some energy companies dispute.


Tristan Landry, spokesperson at the Canadian embassy in Washington, said: “Classifying fuel from the oil sands as non-conventional fuel ... would unnecessarily complicate the integrated Canada-US energy relationship.”


The energy department said the US was “assessing any implication to the US federal fuel procurement practices arising from the bill and will work co-operatively with Canada”.


Copyright The Financial Times Limited 2008

Hillary Clinton and Barack Obama Call For Large Unspecified National 'Sacrifices' and High Cost Enviro-Energy Use Regulatory 'Changes'

http://www.nytimes.com/2008/01/01/opinion/01tue1.html


New York Times


January 1, 2008


Editorial: In Office


The One Environmental Issue


The overriding environmental issue of these times is the warming of the planet. The Democratic hopefuls in the 2008 campaign are fully engaged, calling for large — if still unquantified — national sacrifices and for a transformation in the way the country produces and uses energy. The Republicans do not go much further than conceding that climate change could be a problem and, with the notable exception of John McCain, offer no comprehensive solutions.


In 2000, when Al Gore could have made warming a signature issue in his presidential campaign, his advisers persuaded him that it was too complicated and forbidding an issue to sell to ordinary voters. For similar reasons, John Kerry’s ambitious ideas for addressing climate change and reducing the country’s dependence on foreign oil never advanced much beyond his Web site.


Times have certainly changed. It is not yet clear to what extent Americans are willing to grapple with the implications of any serious strategy to reduce greenhouse gas emissions: more specifically, whether they are ready to pay higher prices for energy and change their lifestyles to reduce their consumption of fossil fuels.


Polls suggest, however, that voters are increasingly alarmed, and for that Mr. Gore is partly responsible. His film, “An Inconvenient Truth,” raised the issue’s profile. Then came four reports from the United Nations Intergovernmental Panel on Climate Change, which shared the Nobel Peace Prize with Mr. Gore, predicting catastrophic changes in weather patterns, sea levels and food production unless greenhouses gases can be quickly stabilized and then reduced by as much as 80 percent by midcentury.


There is also a growing appetite for decisive action — everywhere, it seems, except the White House. Governors in more than two dozen states are fashioning regional agreements to lower greenhouse gases, the federal courts have ordered the executive branch to begin regulating these gases, and the Senate has begun work on a bipartisan bill that would reduce emissions by nearly 65 percent by 2050.


[THIS IS PATENTLY FALSE - RATHER, THE U.S. SUPREME COURT ORDERED, IN MASSACHUSETTS V. EPA, WHICH WAS DECIDED APRIL 2, 2007, THAT
(http://www.supremecourtus.gov/opinions/06pdf/05-1120.pdf) "BECAUSE GREENHOUSE GASES FIT WELL WITHIN THE [CLEAN AIR] ACT'S CAPACIOUS DEFINITION OF 'AIR POLLUTANT', THE ENVIRONMENTAL PROTECTION AGENCY MUST EVALUTE WHETHER GREENHOUSE GASES, SUCH AS CARBON DIOXIDE, "CAUSE[] OR CONTRIBUTE[] TO AIR POLLUTION WHICH MAY REASONABLY BE ANTICIPATED TO 'ENDANGER' PUBLIC HEALTH OR WELFARE", WITHIN THE MEANING OF SECTION 7601(a)(1) OF THE FEDERAL CLEAN AIR ACT. THE SUPREME COURT DID NOT REQUIRE THE EPA TO REGULATE CARBON DIOXIDE AS MANY ENVIRONMENTAL ACTIVIST GROUPS HAVE FALSELY CLAIMED. "WHILE THE STATUTE [CLEAN AIR ACT] CONDITIONS EPA ACTION ON ITS FORMATION OF A 'JUDGMENT', THAT JUDGMENT MUST RELATED TO WHETHER AN AIR POLLUTANT 'CAUSES[S], OR CONTRIBUTE[S] TO, AIR POLLUTION WHICH MAY REASONABLY BE ANTICIPATED TO ENDANGER PUBLIC HEALTH OR WELFARE'." §7601(a)(1). UNDER THE ACT'S CLEAR TERMS, EPA CAN AVOID PROMULGATING REGULATIONS ONLY IF IT DETERMINES THAT GREENHOUSE GASES DO NOT CONTRIBUTE TO CLIMATE CHANGE OR IF IT PROVIDES SOME REASONABLE EXPLANATION AS TO WHY IT CANNOT OR WILL NOT EXERCISE ITS DISCRETION TO DETERMINE WHETHER THEY DO."]


Still, the country is a long way from a comprehensive response equal to the challenge. That is what the Democratic candidates are proposing. Senators Joseph Biden, Hillary Clinton and Barack Obama, former Senator John Edwards, Gov. Bill Richardson and Representative Dennis Kucinich have all offered aggressive plans that would go beyond the Senate bill and reduce emissions by 80 percent by midcentury (90 percent in Mr. Richardson’s case), much as called for in the United Nations reports.


These plans would rest primarily on a cap-and-trade scheme that imposes a gradually declining ceiling on emissions and allows power plants, refineries and other emitters to figure out the cheapest way to meet their quotas — either by reducing emissions on their own or by purchasing credits from more efficient producers. The idea is to give companies a clear financial incentive to invest in the new technologies and efficiencies required to create a more carbon-free economy.


[THE USE OF EMISSIONS CAP & TRADE REGIMES ARE QUITE EXPENSIVE TO THE PUBLIC (CONSUMERS) AND CANNOT ENSURE THAT ACTUAL EMISSIONS OF CARBON DIOXIDE INTO THE ENVIRONMENT ARE INDEED REDUCED, SINCE A CAP & TRADE REGIME SIMPLY INVOLVES ONLY 'PAPER ACCOUNTING ENTRIES' THAT REFLECT 'OFFSETS' OF FICTITIOUS CARBON CREDITS CALCULATED IN RELATIONSHIP TO A REGULATORY LIMIT, WITH ACTUAL CALCULATED EMISSIONS. THE CANDIDATES' CAP & TRADE PLANS DO NOT SPECIFY HOW SUCH CALCULATIONS CAN AND WILL BE VERIFIED. ONE NEED ONLY LOOK TO THE SELF-ADMITTED FAILURE OF THE EUROPEAN UNION'S CARBON DIOXIDE CAP & TRADE SYSTEM]


None of the Democrats trust the market to do the job by itself. All would make major investments in cleaner fuels and delivery systems, including coal-fired power plants capable of capturing carbon emissions and storing them underground. Every Democrat except Mr. Kucinich says that carbon-free nuclear power has to be part of the mix, although all are careful to say that safety issues and other concerns must first be resolved.


Internationally, the Democrats say they would seek a new global accord on reducing emissions to replace and improve upon the Kyoto Protocol, which expires in 2012. Winning agreement among more than 180 nations will be slow-going, so several candidates, including Mrs. Clinton, have suggested jump-starting the process by bringing together the big emitters like China very early in their administrations. China and the United States together produce about 40 percent of the world’s total emissions and neither has agreed to binding reductions.


The only Republican candidate who comes close to the Democrats with a plan for addressing climate change is John McCain, one of the authentic pioneers on the issue in the Senate. In 2003, along with Joseph Lieberman, Mr. McCain introduced the first Senate bill aimed at mandatory economy-wide reductions in emissions of 65 percent by midcentury. He also regularly addresses the subject on the campaign trail.


The other leading Republican candidates — Mitt Romney, Rudolph Giuliani, Fred Thompson, Mike Huckabee — talk about energy issues almost exclusively in the context of freeing America from its dependence on foreign oil. All promote nuclear power, embrace energy efficiency and promise greener technologies. Only Mr. Huckabee has dared raise the idea of government regulation, embracing, at least theoretically, the idea of a mandatory cap on emissions. The rest prefer President Bush’s cost-free and demonstrably inadequate voluntary approach, which essentially asks industry to do what it can to reduce emissions.


So far, the Democratic candidates seem more engaged with the issue than some of their interrogators in the news media. In a recent study, the League of Conservation Voters found that as of two weeks ago, the five main political talk-show hosts had collectively asked 2,275 questions of candidates in both parties. Only 24 of the questions even touched on climate change.


One result is that even the candidates who urge comprehensive change have not been pressed on important questions of cost: How do they intend to pay for all the new efficiencies and technologies that will be necessary? And what kind of sacrifices will they be asking of people who almost certainly will have to pay more for their electric bills and their greener cars?


[THESE ARE EXCELLENT QUESTIONS THAT DESERVE HONEST ANSWERS, WHICH HAVE NOT YET BEEN FORTHCOMING]


Addressing these questions will require more courage of the candidates than simply offering up broad new visions. The voters deserve an honest accounting and the candidates should be prepared to give it.

New York Times: In 2008, a 100 Percent Chance of Alarm

http://www.nytimes.com/2008/01/01/science/01tier.html?_r=2&ref=science&oref=slogin&oref=slogin

By JOHN TIERNEY


Published: January 1, 2008


New York Times


I’d like to wish you a happy New Year, but I’m afraid I have a different sort of prediction.
Skip to next paragraph


How will the world react to climate change in 2008?

Join the discussion. Go to TierneyLab »
Further Reading:


"Availability Cascades and Risk Regulation." Timur Kuran and Cass Sunstein. Stanford Law Review, 1999 "Availability Cascades and Risk Regulation Media Coverage and Climate Change." Prometheus blog, Roger Pielke, Jr.
"Media Mania for a 'Front-Page Thought' on Climate." Dot Earth blog, Andrew C. Revkin.
"2007 Tropical Cyclone Season Summary." Ryan N. Maue, Center for Ocean-Atmospheric Prediction Studies.
"Effect of Remote Sea Surface Temperature Change on Tropical Cyclone Potential Intensity." G.A. Vecchi , B.J. Soden. Nature, Dec. 3, 2007.
"Heightened Tropical Cyclone Activity in the North Atlantic." G.J. Holland, P.J. Webster. Philosophical Transactions of the Royal Society, Nov. 15, 2007.
"Arctic Melt Unnerves the Experts." Andrew C. Revkin. New York Times, Oct. 2, 2007.
"NASA Sees Arctic Ocean Circulation Do an About-Face."
"NASA Examines Arctic Sea Ice Changes Leading to Record Low in 2007."
"2007 to Be 'Warmest on Record.'" BBC News.
"2007 Data Confirms Warming Trend." BBC News.


You’re in for very bad weather. In 2008, your television will bring you image after frightening image of natural havoc linked to global warming. You will be told that such bizarre weather must be a sign of dangerous climate change — and that these images are a mere preview of what’s in store unless we act quickly to cool the planet.


Unfortunately, I can’t be more specific. I don’t know if disaster will come by flood or drought, hurricane or blizzard, fire or ice. Nor do I have any idea how much the planet will warm this year or what that means for your local forecast. Long-term climate models cannot explain short-term weather.


But there’s bound to be some weird weather somewhere, and we will react like the sailors in the Book of Jonah. When a storm hit their ship, they didn’t ascribe it to a seasonal weather pattern. They quickly identified the cause (Jonah’s sinfulness) and agreed to an appropriate policy response (throw Jonah overboard).


Today’s interpreters of the weather are what social scientists call availability entrepreneurs: the activists, journalists and publicity-savvy scientists who selectively monitor the globe looking for newsworthy evidence of a new form of sinfulness, burning fossil fuels.


A year ago, British meteorologists made headlines predicting that the buildup of greenhouse gases would help make 2007 the hottest year on record. At year’s end, even though the British scientists reported the global temperature average was not a new record — it was actually lower than any year since 2001 — the BBC confidently proclaimed, “2007 Data Confirms Warming Trend.”


When the Arctic sea ice last year hit the lowest level ever recorded by satellites, it was big news and heralded as a sign that the whole planet was warming. When the Antarctic sea ice last year reached the highest level ever recorded by satellites, it was pretty much ignored. A large part of Antarctica has been cooling recently, but most coverage of that continent has focused on one small part that has warmed.


When Hurricane Katrina flooded New Orleans in 2005, it was supposed to be a harbinger of the stormier world predicted by some climate modelers. When the next two hurricane seasons were fairly calm — by some measures, last season in the Northern Hemisphere was the calmest in three decades — the availability entrepreneurs changed the subject. Droughts in California and Australia became the new harbingers of climate change (never mind that a warmer planet is projected to have more, not less, precipitation over all).


The most charitable excuse for this bias in weather divination is that the entrepreneurs are trying to offset another bias. The planet has indeed gotten warmer, and it is projected to keep warming because of greenhouse emissions, but this process is too slow to make much impact on the public.


When judging risks, we often go wrong by using what’s called the availability heuristic: we gauge a danger according to how many examples of it are readily available in our minds. Thus we overestimate the odds of dying in a terrorist attack or a plane crash because we’ve seen such dramatic deaths so often on television; we underestimate the risks of dying from a stroke because we don’t have so many vivid images readily available.


Slow warming doesn’t make for memorable images on television or in people’s minds, so activists, journalists and scientists have looked to hurricanes, wild fires and starving polar bears instead. They have used these images to start an “availability cascade,” a term coined by Timur Kuran, professor of economics and political science at Duke University, and Cass R. Sunstein, a law professor at the University of Chicago.


The availability cascade is a self-perpetuating process: the more attention a danger gets, the more worried people become, leading to more news coverage and more fear. Once the images of Sept. 11 made terrorism seem a major threat, the press and the police lavished attention on potential new attacks and supposed plots. After Three Mile Island and “The China Syndrome,” minor malfunctions at nuclear power plants suddenly became newsworthy.


“Many people concerned about climate change,” Dr. Sunstein says, “want to create an availability cascade by fixing an incident in people’s minds. Hurricane Katrina is just an early example; there will be others. I don’t doubt that climate change is real and that it presents a serious threat, but there’s a danger that any ‘consensus’ on particular events or specific findings is, in part, a cascade.”


Once a cascade is under way, it becomes tough to sort out risks because experts become reluctant to dispute the popular wisdom, and are ignored if they do. Now that the melting Arctic has become the symbol of global warming, there’s not much interest in hearing other explanations of why the ice is melting — or why the globe’s other pole isn’t melting, too.


Global warming has an impact on both polar regions, but they’re also strongly influenced by regional weather patterns and ocean currents. Two studies by NASA and university scientists last year concluded that much of the recent melting of Arctic sea ice was related to a cyclical change in ocean currents and winds, but those studies got relatively little attention — and were certainly no match for the images of struggling polar bears so popular with availability entrepreneurs.


Roger A. Pielke Jr., a professor of environmental studies at the University of Colorado, recently noted the very different reception received last year by two conflicting papers on the link between hurricanes and global warming. He counted 79 news articles about a paper in the Philosophical Transactions of the Royal Society, and only 3 news articles about one in a far more prestigious journal, Nature.


Guess which paper jibed with the theory — and image of Katrina — presented by Al Gore’s “Inconvenient Truth”?


It was, of course, the paper in the more obscure journal, which suggested that global warming is creating more hurricanes. The paper in Nature concluded that global warming has a minimal effect on hurricanes. It was published in December — by coincidence, the same week that Mr. Gore received his Nobel Peace Prize.


In his acceptance speech, Mr. Gore didn’t dwell on the complexities of the hurricane debate. Nor, in his roundup of the 2007 weather, did he mention how calm the hurricane season had been. Instead, he alluded somewhat mysteriously to “stronger storms in the Atlantic and Pacific,” and focused on other kinds of disasters, like “massive droughts” and “massive flooding.”


“In the last few months,” Mr. Gore said, “it has been harder and harder to misinterpret the signs that our world is spinning out of kilter.” But he was being too modest. Thanks to availability entrepreneurs like him, misinterpreting the weather is getting easier and easier.

The Ethanol Fallacy: Will Politicians Ever Learn???

http://www.popularmechanics.com/science/earth/4237539.html?series=46


The Ethanol Fallacy


Op-Ed


Popular Mechanics (Feb. 2008)


By James B. Meigs (PM's editor-in-chief)


America needs smart alternative to oil, but the just-passed energy bill puts too much emphasis on the wrong alternative, PM's editor-in-chief says.



The idea is so appealing: We can reduce our dependence on oil-stop sending U.S. dollars to corrupt petro-dictators, stop spewing megatons of carbon into the atmosphere-by replacing it with clean, home-grown, all-American corn. It sounds too good to be true.



Sadly, it is.



Of course we need alternatives to oil. The world uses a cubic mile of petroleum each year, and demand keeps rising as the global economy booms. At first glance, corn seems like a heaven-sent substitute. American corn farmers are the most productive in the world, growing far more of the grain than we can possibly eat, and exporting mountains of the stuff to other countries. And the corn kernel is a marvel of energy storage. Converting that compact bundle of starches into alcohol is a relatively simple trick known to generations of moonshiners. So why not build corn liquor stills on an industrial scale and use the output to power our cars and trucks?



That's exactly what this country has been doing for the past several years. Some 134 ethanol plants are now in operation, consuming close to 1.6 billion bushels of grain, about 15 percent of our total corn production. To feed the ethanol machine, farmers planted almost 93 million acres of corn in 2007, a 19 percent increase over the previous year, and the highest figure since 1944 (when yields per acre were far lower).



The result is that the country is now experiencing an ethanol glut. Prices are sagging-as are plans to build ethanol refineries from sea to shining sea. Yet many in Washington seem determined to force still more ethanol into the system. The just-passed Energy Independence and Security Act of 2007, which President Bush has said he will sign, mandates corn ethanol usage of 15 billion gal. a year (more than three times today's consumption) by 2015. And presidential candidates have outdone each other with vows to flood the nation with ever-increasing rivers of ethanol for at least a generation.



It's great that our politicians have discovered the need for new energy technologies. But it appears that Washington is determined to put its money-our money-on the wrong horse. Right now, researchers are studying a host of energy solutions, including hydrogen, high-mileage diesel, plug-in hybrids, radical reductions in vehicle weight and cellulosic ethanol (made from cornstalks, switchgrass or other nonfood crops).



It is far too soon to say which of these holds the most promise. But, instead of promoting experimentation and competition to find the best solutions, politicians seem ready to declare ethanol the winner. As a result, our nation could wind up with the worst of both worlds: an ‘alternative’ energy that is enormously expensive yet barely saves a gallon of oil.



Let's start with the math. Corn doesn't grow like a weed. Modern corn farming involves heavy inputs of nitrogen fertilizer (made with natural gas), applications of herbicides and other chemicals (made mostly from oil), heavy machinery (which runs on diesel) and transportation (diesel again). Converting the corn into fuel requires still more energy. The ratio of how much energy is used to make ethanol versus how much it delivers is known as the energy balance, and calculating it is surprisingly complex.



The National Renewable Energy Laboratory states that, “Today, 1 Btu of fossil energy consumed in producing and delivering corn ethanol results in 1.3 Btu of usable energy in your fuel tank.” Even that modest payback may be overstated. Skeptics cite the research of Cornell University professor David Pimentel, who estimates that it takes approximately 1.3 gal. of oil to produce a single gallon of ethanol.



If the benefits are in doubt, the costs are not. It would take 450 pounds of corn to yield enough ethanol to fill the tank of an SUV. Producing enough ethanol to replace America's imported oil alone would require putting nearly 900 million acres under cultivation-or roughly 95 percent of the active farmland in the country. Once we've turned our farms into filling stations, where will the food come from?



There's a simple reason that ethanol is popular with politicians: money. Substituting corn ethanol for a large fraction of the gasoline we burn will mean sluicing gushers of cash from more populated states to politically powerful farm states. And a lot of that cash will wind up in the pockets of the big agribusinesses, like Archer Daniels Midland, that dominate ethanol processing-and whose fat checkbooks wield enormous influence in Washington.



In fact, governments generally have a bad track record when it comes to picking technologies. In the midst of an earlier oil crunch, President Jimmy Carter seized on ‘synfuels’-refined from oil shale deposits-as a panacea. Oops. Synfuels turned out to be woefully uneconomic, environmentally disastrous and feasible only with massive government subsidies. It took years to kill the program off-and the last of the multibillion-dollar tax credits just expired in 2007.



The corn ethanol boondoggle threatens to be far, far worse. If enacted, current proposals will amount to a huge hidden tax on consumers, with benefits flowing to the politically connected. Once set in motion, such a program would be all but impossible to stop-even if other alternatives, like cellulosic ethanol, turn out to be vastly superior. And every dollar spent on corn ethanol is a dollar not spent on those other, more promising approaches.



So what should the government do? First off: no harm. Instead of trying to mandate specific technologies-and risk locking us into using the wrong one-Washington should create incentives to help the market choose the best approaches. One step would be to reward consumers for conservation: There are vast opportunities to make our homes, businesses and vehicles more efficient, and to make our economy stronger in the process.



Perhaps someday corn ethanol will prove itself a viable part of our energy mix. But corn liquor is powerful stuff, and it can make people do strange things. Let's keep it out of Washington's hands.