Tag: energy

You Ought to Have a Look: Platform Planks on Energy and the Environment

You Ought to Have a Look is a feature from the Center for the Study of Science posted by Patrick J. Michaels and Paul C. (“Chip”) Knappenberger.  While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic.  Here we post a few of the best in recent days, along with our color commentary.

With the end of Convention season mercifully upon us, we thought we ought to have a look at what the party platforms have to say about energy and the environment, with an eye on climate change policies in particular.

We’ll start out with the Democratic Party Platform.

The Democrats are of the mind that human-caused climate change is one of the major problems facing the country/world today, describing it as “an urgent threat and a defining challenge of our time.”

It’s unclear that the voters feel that way… although part of the Democrats strategy for this election seems to be to try to persuade them otherwise.

The Democratic platform is chock full of government actions that promise to initiate, broaden and extend the current set of rules, regulation, and orders seeking to reduce our emissions of carbon dioxide (and other greenhouse gases), largely by way of lessening (on the way to eliminating) our reliance on fossil fuels as our primary source of energy production. This collection of promised federal actions is large both in scope and number and includes everything from pursuing a carbon tax

You Ought to Have a Look: Our Energy Future, Science Regress, and a Greening Earth

You Ought to Have a Look is a feature from the Center for the Study of Science posted by Patrick J. Michaels and Paul C. (“Chip”) Knappenberger.  While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic.  Here we post a few of the best in recent days, along with our color commentary.

We’ll jump right into this week by highlighting an appearance by Manhattan Institute senior fellow Mark Mills on The Federalist’s Radio Hour. During his time on the show, Mills explains how the foreseeable future is going to play out when it comes to global energy production and why he says that even if you were concerned about climate change, “there really isn’t anything you can do about it.” 

Mills is one of the leading thinkers and analysts on energy systems, energy markets, and energy policy, bringing often overlooked and deeply-buried information to the forefront.

During his nearly hour-long radio segment, Mills discusses topics ranging from climate change, the world’s future energy mix, the role of technological advances, and energy policy as well as giving his opinions on both Bills Gates’ and Pope Francis’ take on all of the above. It is an entertaining and informative interview.

As a taste, here’s a transcript of a small segment:

In the life we live, and the world we live in, we have to do two things, one is deal with reality [current understanding of physics] and the moral consequences of that, and we can have aspirations. If the aspiration, which Bill Gates’ is, is to use fewer hydrocarbons, we need to support basic research.

We don’t subsidize stuff. The reason we don’t subsidize stuff and make energy more expensive, is because, for me, it is morally bankrupt to increase the cost of energy for most people in most of the world. Energy should be cheaper, not more expensive. We use energy to make our lives better. We use energy to make our lives safer. We use energy to make our lives more enjoyable. Everything that we care about in the world, safety, convenience, freedom, costs energy. [emphasis added]

Mark Mills’ sentiment closely matches that which Alex Epstein explained to Congress a few weeks back and that we highlighted in our last edition. 

If you can find any time to listen to a little or a lot of Mills’ full interview, you’ll probably find that what he says to make a lot of sense. Funny, though, how much of it seems to have escaped some folks.

Next up is an article in the current issue of First Things authored by Walter Wilson titled “Scientific Regress.” If you think the title is provocative, you ought to have a look at the rest of the piece beginning with the first line “The problem with ­science is that so much of it simply isn’t.” Instead, it reflects the results of a gamed system driven by pre-conceived ideas often emanating from the science/political establishment.

Will Senate Use Energy Bill to Weaken FHA Mortgages?

As I recall from my time in the Senate, there’s nothing like an energy bill to attract misguided proposals.  This week the Senate begins consideration of S.2012 — the Energy Policy Modernization Act of 2015.  Among the almost two hundred filed amendments is a proposal (Amendment #3042) from former real estate broker, Senator Isakson, to mandate that the Federal Housing Administration (FHA) reduce the quality of its loans in order to encourage more efficient energy use.

The two most concerning aspects of Amdt 3042 are 1) it would allow “estimated energy savings” to be used to increase the allowable debt-to-income (DTI) ratios for the loan and; 2) require “that the estimated energy savings…be added to the appraised value…”

These changes might not be so bad in the abstract but when combined with existing FHA standards, they set the borrower up for failure and leave the taxpayer holding the bag. Let’s recall that borrowers can already get a FHA mortgage at a loan to value (LTV) of 96.5%, and that’s assuming an accurate appraisal.  If borrowers were required to put 20 percent down, then this amendment would be a minor problem, but under existing standards, borrowers would mostly likely leave the table with an LTV over 100%, that is already underwater before they’ve even moved in.  Did Congress learn nothing from the crisis?

The increase in DTI might not matter if FHA did not already allow a DTI as high as 43% of income.  Under Amdt 3042 borrowers could easily leave the closing table devoting over half their income to their mortgage.  Again, did Congress learn nothing from the crisis?

To illustrate that the intent of the proposal is to have the taxpayer take more risk, Amdt 3042 actually prohibits FHA from imposing any standards that would offset this risk.  If these new loans perform worse, as one would expect, FHA cannot put them back to the lenders.   And let’s not forget FHA allows the borrower to have a credit history deep in the subprime range.  So you could have a subprime borrower, say FICO down to 580, LTV > 100% and DTI > 43% - what could go wrong?

If indeed energy savings actually increased the value of the home, that would be reflected in the price.  There would be no need to mandate such.  Not only does this proposal weaken FHA standards, and expose the taxpayer to greater risk, it takes us further down the path of an already politicized housing policy, where instead of relying on market prices, values are dictated by Soviet-style bureaucratic guesswork.

U.S. Trade Policy Attacks U.S. Energy Policy, Both Hurting

First there were oil and gas export restrictions, then pipeline injunctions, now import restrictions on the steel needed for exploration and extraction.  Washington is coming from all angles to kneecap the energy boom sparked by the horizontal drilling and fracking revolutions – a once in a generation supply-side shock, which otherwise promises to attract a flood of foreign investment and serve as a wellspring of economic growth and job creation.
 
The most recent assault on our “All of the Above” energy policy comes via our fantastically self-destructive trade policy. Last Friday, in a final antidumping determination, the U.S. Department of Commerce found exporters from nine countries to be dumping “Oil Country Tubular Goods” (OCTG) – a class of steel products used primarily in oil and gas well projects – in the U.S. market. The most important foreign source of OCTG in the case was South Korea, whose exporters were found NOT to be dumping in the preliminary determination issued back in February.
 
But in the intervening months, the U.S. steel industry and the Congressional Steel Caucus impressed upon the bean counters at Commerce that the methodology they used for the Korean preliminary determination was inferior to an alterative they favored.  Without getting too into the weeds here, as tends to happen when exposing the dishonesty of the antidumping regime, suffice it to say that the revision from 0% dumping margins to 10%-16% for Korean exporters was primarily the result of Commerce changing its estimate of what the home market profit rate “should be.”
 
For the preliminary determination, that estimate was based on Korean OCTG producers’ experiences (with OCTG and other products).  For the final determination, Commerce changed its estimate to one based on a University of Iowa graduate student’s estimation of the profit experience of a single Argentine OCTG producer named Tenaris.  That’s right!  The cost of steel for U.S. oil well projects will rise – maybe 16% – because some student was messing around with @functions on Microsoft Excel.
 
Topics:

Egypt’s Subsidy Nightmare

If you think that Western welfare states are in a pickle, imagine what they would look like if, instead of transferring money, governments tried to help people by giving all of them free or cheap stuff. One does not need to be an economist to see the inefficiency of in-kind transfers, but many countries use redistribution of stuff – typically in the form of commodity subsidies – as the main tool of redistribution and social assistance.

In Egypt, the government subsidizes the prices of fuels and certain food products at artificially low levels. Obviously, the wealthy – who can afford to consume more of the subsidized commodities – are the largest beneficiaries of the subsidy system. In urban areas of Egypt, for example, the top quintile of the income distribution receives eight times as much in energy subsidies as the bottom quintile.

As I argue in a new Cato Policy Analysis published today, commodity subsidies are behind Egypt’s fiscal meltdown – the country is currently running a deficit of 15 percent of GDP, while being kept afloat only by the inflow of funds from the Gulf countries. To avert a looming fiscal catastrophe, Egyptian policymakers need to act now. The paper, which I also summarize here, provides a list of recommendations about how the reform should be approached:

U.S. Policies Deter Inward and Encourage Outward Business Investment

This morning, Cato published a new study of mine titled, “Reversing Worrisome Trends: How to Attract and Retain Investment in a Competitive Global Economy.” The thrust of the paper is that, despite still being the world’s premiere destination for foreign direct investment, the U.S. share of the global stock of direct investment fell from 39% in 1999 to 17% today.

This downward trend is attributable to two broad factors. First, developing economies – many of which have achieved greater political stability, sustained economic growth, improved infrastructure and higher-quality worker skill sets – are now viable options for pulling in the kinds of FDI that was once untenable in those locales. Second, a deteriorating business and investment climate in the United States – owing to burgeoning, burdensome, and uncertain regulations; an antiquated, punitive corporate tax system; incoherent immigration, energy, and trade policies; a wayward tort system; cronyism and perceptions thereof; and other perverse incentives and disincentives of policy have pushed investment away.

The first trend should be welcomed and embraced; the second must be reversed. From the study:

Unlike ever before, the world’s producers have a wealth of options when it comes to where and how they organize product development, production, assembly, distribution, and other functions on the continuum from product conception to consumption. As businesses look to the most productive combinations of labor and capital, to the most efficient production processes, and to the best ways of getting products and services to market, perceptions about the business environment can be determinative. In a global economy, “offshoring” is an inevitable consequence of competition. And policy improvement should be the broad, beneficial result.

The capacity of the United States to continue to be a magnet for both foreign and domestic investment is largely a function of its advantages, many of which are shaped by public policy. Considerations of taxes, regulations, trade openness, access to skilled workers, infrastructure, energy policy, and dozens of other policy matters factor into decisions about whether, where, and how much to invest. It should be of major concern that inward FDI has been erratic and relatively downward trending in recent years, but why that is the case should not be a mystery. U.S. scores on a variety of renowned business surveys and investment indices measuring policy and perceptions of policy suggest that the U.S. business environment is becoming increasingly less hospitable.

Although some policymakers recognize the need for reform, others seem to be impervious to the investment-repelling effects of some of the laws and regulations they create. Some see the shale gas and oil booms as more than sufficient for overcoming policy shortcomings and attracting the necessary investment. The most naive consider “American” companies to be tethered to the U.S. economy and obligated to invest and hire in the United States, regardless of the quality of the business and policy environments. They fail to appreciate that increasingly transnational U.S.-based businesses are not obligated to invest, produce, or hire in the United States.

It is the responsibility of policymakers, however, to create an environment that is more attractive to prospective investors. Current laws, regulations, and other conditions affecting the U.S. business environment are conspiring to deter inward investment and to encourage companies to offshore operations that could otherwise be performed competitively in the United States.

A proper accounting of these policies, followed by implementation of reforms to remedy shortcomings, will be necessary if the United States is going to compete effectively for the investment required to fuel economic growth and higher living standards.

Details, charts, and analysis, and citations are all included here.

The Best Government Action on Climate Change Is No Government Action on Climate Change

Global Science Report is a weekly feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

Many eyes will be on President Obama’s State of the Union address tonight watching to see how he follows his inauguration promise to “respond to the threat of climate change.” Rumors are flying that he will use his executive power to bypass Congress and further EPA efforts to regulate greenhouse gas emissions. But his best response would be to get the federal government out of the energy market and allow it to flourish as it may. The inconvenient truth is that the U.S. influence on global climate is rapidly diminishing as greenhouse gas emissions from the rest of the world rapidly expand. As a consequence, whether or not the United States reduces its emissions at all is immaterial to the path of future climate change and its impacts.

Several reports last week have shown that carbon dioxide emissions from the United States declined in 2012 and now stand at a level on par with what they were back in 1994. U.S. carbon dioxide emissions have dropped about 13 percent from their high in 2007.

All the while, global carbon dioxide emissions have been on the rise—primarily fueled by rapid emissions growth in developing countries, namely China (which is responsible for about two-thirds of the global increase during the past decade).

Figure 1. Emissions of carbon dioxide from the U.S., China, and the rest of the world, 1990-2010 (data from U.S. Energy Informat

Since carbon dioxide is well-mixed in the atmosphere, who actually emits it is of little consequence when it comes to its potential to lead to global warming.  This means that the global percentage of a country’s annual carbon dioxide emissions is equivalent to its annual percentage contribution to the increased warming pressure (we use the term “warming pressure” to indicate that things other than the atmospheric concentration of greenhouse gases also act to influence that global average temperature from one year to the next). Since total global carbon dioxide emissions are quickly distancing themselves from U.S. emissions, as time passes, the relative influence of U.S. emissions on the future state of the global climate is rapidly declining.

Pages