Topic: Energy and Environment

Overregulation, Swing States and D.C. Cynicism

Today’s Wall Street Journal carries a news report on how the Obama administration, after more than two years of pursuing damn-the-costs government control over the private sector, is finally developing more internal debate about whether and when zealous regulations are worth the cost. In particular, Office of Information and Regulatory Affairs chief Cass Sunstein, known as skeptical about some costly rules, has now acquired an important sometime ally in White House Chief of Staff Bill Daley, who played a role in getting EPA to table some very expensive new air-quality standards the other day.

All well and good, but I was stopped short by a paragraph that shouldn’t pass without comment:

The same day, Mr. Daley met with industry groups, who gave the White House a map showing counties that would be out of compliance with the Clean Air Act if the stricter standards were put in place. The map showed that the rule would affect areas in the politically important 2012 election states of Florida, Pennsylvania, Virginia, and Ohio.

Even by Washington standards, isn’t it appallingly cynical to evaluate environmental rules that could (critics have argued) cripple wide sectors of the economy according to whether the worst damage falls on politically vital states like Florida and Ohio, or just ho-hum non-swing states like Oklahoma, North Dakota and Tennessee? True, the article doesn’t say who was cynical enough to draw the connection here – the business groups giving the presentation? The White House listeners? Some third party whose viewpoint this is all being filtered through? But whoever’s being the cynic here, one of the costs is to feed the alienation of citizens of Texas in particular, whose officials and businesses have been complaining for more than a year of being singled out for hostile attention by the Obama EPA. For everyone’s good, I hope someone in the White House at this moment is writing a sharp letter disclaiming any special intent to help Pennsylvania, Virginia et al. And I hope after drafting that letter they will be cleared to send it off for publication in the Journal, not just keep it in the desk to show outraged delegations of Texans.

‘Subsidy Risk’ in Green Tech

Two-and-a-half years ago, I attended a venture capital conference that focused a good deal on “clean tech.” I wasn’t impressed.

[T]he current vogue for “clean tech” differs from the information technology revolution that has done so much for the economy and society. Venture investors may be turning to government subsidy and regulatory advantage for their portfolio businesses, rather than producing to meet a market demand. “Going green” may mean “going red” in at least two senses—a more socialist political economy and a government even deeper in debt.

Essaying to instill some doubts among investors who were banking on “political will,” I asked pointedly how VCs assessed subsidy risk and the vagaries of public policy. The responses weren’t insightful or memorable.

Some vindication of my doubts comes in an article called “The Crisis in Clean Energy” ($) by David Victor and Kassia Yanosek in the July/August Foreign Affairs.

In the United States, most clean-energy subsidies come from the federal government, which makes them especially volatile. Every few years, key federal subsidies for most sources of clean energy expire. Investment freezes until, usually in the final hours of budget negotiations, Congress finds the money to renew the incentives—and investors rush in again. As a result, most investors favor low-risk conventional clean-energy technologies that can be built quickly, before the next bust.

Elsewhere, they write, “With clean energy suffering from long time horizons, high capital intensity, and a heavy dependence on fickle public policies, some Silicon Valley venture firms are scaling back or even canceling their ‘clean tech’ investment arms.”

Alas, Victor and Yanosek don’t call for the federal government to clear the field so entrepreneurialism can flourish. They offer three bland “shifts in approach” that amount to more of the same. Until the federal government does clear the field, watch for the subsidy muddle in green tech to suppress profound innovations while government-directed investment brings modest returns to investors/tax-consumers at the expense of taxpayers.

Irene Wasn’t All That

Hurricane Irene (which seemed more like Tropical Storm Irene from Virginia Beach to New York City) has prompted the usual rhetoric from the usual suspects about global warming making these storms worse.  Too bad there is no evidence for this whatsoever on a global scale.

Ryan Maue, at Florida State University, tracks global tropical cyclone energy back to 1970, which is the time at which adequate data on hurricane winds became available. His “Accumulated Cyclone Energy” (ACE) index peaked in the mid 1990’s and in recent years has been at or near the lowest point ever recorded. His most recent refereed paper, in press at Geophysical Research Letters, is called “Recent Historically Low Global Tropical Cyclone Activity.”  Enough said?

However, there is an interesting trend in Atlantic hurricane activity. The Department of Commerce’s National Hurricane Center (NHC) is naming tropical storms that they clearly would have ignored in previous years.  This year we have had ten (the latest is “Jose”, which currently looks weak in satellite imagery), and I doubt that seven of these would have made the grade years ago.  In fact, I have written to NHC’s Chris Landsea (with whom I have authored refereed papers on hurricanes) about this, and he agrees that NHC is naming systems that they would have previously ignored or missed.  Frankly, some of our recent “tropical storms” have pitiful presentations, looking more like small clusters of thunderstorms than the familiar pinwheels of nascent hurricanes.  A recent paper in Journal of Geophysical Research, by Princeton’s Gabriele Villarini, noted the contamination of the Atlantic hurricane data by what he called “shorties.”

Why NHC is doing this, and why they kept Hurricane Irene’s “category” (one through five) high despite  acknowledging that hurricane hunter aircraft were having trouble finding enough wind, has more to do with risk aversion than any putative conspiracy to toe the politically correct line on global warming. The result is that ships at sea are “warned” of brisk winds and high seas that might have previously surprised them, and that politicians and emergency management officials can justify massive evacuation orders. This used to be known as covering one’s posterior.  Now NHC sometimes calls it “the course of least regret.”

It is also a dangerous practice. People who endure the endless torture of a hurricane evacuation from barrier islands like the North Carolina Outer Banks from storms that cause little damage may be reluctant to leave when the next – big and real – one shows up.

Consumers and the ‘Smart Grid’

The drive to let consumer-level electricity prices float as prices do in innumerable other markets has been stunted by complaints about so-called “smart meters” that would give consumers the ability to respond to fluctuations in the realtime price of electricity.

When the California Energy Commission attempted to put these kinds of meters into new buildings, the knee-jerk reaction consisted largely of complaints about the government “taking over” consumers’ electricity consumption in the case of a looming blackout. For more on why these concerns lacked some essential context, listen to the podcast with Peter Van Doren on the case of the CEC.

As I discussed with economist Lynne Kiesling at Cato University, consumer-side responses to varying electricity prices could take many forms, from smarter appliances plugged into the same pricing information to battery technology to take advantage of times of low electricity demand. What’s more, dynamic pricing could someday let consumers turn the product of electricity into the service of electricity by allowing consumers to pay a premium for costlier but “greener” methods of electricity generation.

Here’s more from Kiesling on smart meters.

2,000 Deaths per Year … for the Environment

Something as simple as the concept of tradeoffs can cause cognitive dissonance to good-hearted people who want too hard to drive the society toward their perception of the good.

A nice illustration of that is the cost in lives of making cars that use less gasoline. How can doing good for the environment possibly be harmful? Oh, it can be deadly.

Nicely illustrated by CEI’s Sam Kazman on John Stossel’s show.

America 2050: Forget the Forgotten Mode

Half truths, innuendo, and pseudo-science form the basis of a response to my recent Cato paper, Intercity Buses: The Forgotten Mode. The response is produced by America 2050, a project of the Regional Plan Association, a New York City–area regional planning organization. The response’s basic thesis of the response is that intercity buses have a role to play in a “balanced transportation system,” but they are “no replacement for high-speed rail.”

Of course, my report never argued that buses were a replacement for true high-speed rail. But it did show that existing bus schedules in many corridors are faster, more frequent, and charge far lower fares than Amtrak in the same corridors. Of course, there is a “replacement” for high-speed rail: it is called “air travel” and it is far faster and costs about a fifth as much per passenger mile as Amtrak’s Acela.

In any case, America 2050 says my report ignored “one of the most powerful arguments for rail: providing an alternative to highway congestion.” I didn’t address that argument in the paper on buses because, as I’ve shown in other papers, it’s a bad argument. Highways move about 85 percent of all passenger travel and more than a quarter of all ton-miles of freight in this country. If they are congested, maybe we should relieve that congestion rather than spending hundreds of billions of dollars on an elitist rail network that won’t relieve congestion and won’t carry more than a tiny fraction of the number of people (and none of the freight) moved on the highways.

But we can’t fix highway congestion, says America 2050: “providing additional road space does not solve congestion; in fact it creates additional demand for driving.” That’s another bad argument, for four reasons. First, my bus paper never advocated building new roads, and if asked, I would have suggested relieving congestion using congestion pricing of roads before building new capacity.

Second, the idea that building roads creates demand is totally absurd. As my friend, Wendell Cox, says, it is akin to saying that building maternity wards leads people to have more babies.

Third, those who argue that we shouldn’t build roads because people will drive on them are effectively arguing that government shouldn’t provide anything that people will use; only what they won’t use (such as high-speed trains). If that’s the case, government should just get out of the transportation business entirely and leave it to the private sector.

Finally, most congestion is in cities, not between them, so building rail lines between cities isn’t going to help much. Of course, planners don’t want to relieve congestion anywhere because they hope congestion will persuade a few people to stop driving.

America 2050 goes on to say that “one railway with a single track in each direction has the capacity to transport as many people per hour as sixteen lanes of highway.” While I could dispute that number, even if true, capacity doesn’t matter unless people actually use that capacity. Amtrak has 6 percent of the passenger market between Boston and Washington; highways, mainly Interstate 95, have 80 percent. Interstate 95 and parallel roads probably have less than 16 lanes, yet they carry 13 times as many passenger miles.

“High-speed trains allow passengers to bypass this congestion,” America 2050 goes on to say, “bringing passengers directly into center cities.” Yes, but who wants to go directly into center cities? Less than 8 percent of American jobs and less than 1 percent of America’s population lives in city centers (which is why I call high-speed rail “elitist”). In many, if not most, urban areas, more people and more jobs are located near airports than near train stations, and virtually everyone is near a highway.

America 2050 then challenges some of my numbers that it says are “flatly incorrect.” “To count passenger miles,” says the article, “O’Toole uses the American Bus Association’s 2005 Motorcoach Census, which counts passenger-miles logged by intracity airport shuttles, sightseeing tours, and private commuter buses, amongst other categories that are not making cross country or intercity trips.” America 2050 clearly did not read my paper carefully: first, I used the 2007 Motorcoach Census, but, more important, I counted only those passenger miles (about a quarter of the total) attributable to scheduled intercity buses.

When comparing bus to rail safey, “O’Toole counts passenger miles only for Amtrak trains, while counting fatalities for all passenger trains, including commuter rail,” says America 2050. Again, America 2050 did not read carefully. National Transportation Statistics reports that commuter trains suffered about 20 to 60 fatalities per year over the past two decades; the fatalities I reported ranged from 3 to 24 per year (except in 1993 when there were 58), which obviously does not include the commuter rail fatalities. That 1993 number may have skewed my data upwards; but rail fatalities are nevertheless higher than bus fatalities per billion passenger miles.

America 2050 then goes into the topic of subsidies, noting there are large subsidies to highways. “Recently, the Highway Trust Fund has received bailouts of $8 billion in 2008, $7 billion in 2009, and $20 billion in 2010.” As I’ve noted elsewhere, those bailouts were not subsidies to highways; they were subsidies to pork barrel. If Congress had not diverted a third of gas tax revenues to non-highway projects, and then mandated spending on those projects even if gas tax revenues fell short, the bailouts would not have been necessary.

Admittedly, there are highway subsidies, mainly at the local level. But when compared with highway usage, which is on the order of 4 trillion passenger miles and 1 trillion ton miles of freight per year, the subsidies are trivial: about a penny per passenger mile at most. Since intercity buses operate with about twice the occupancy rates of other vehicles, subsidies to them are probably much lower (and were taken into account in the numbers my paper cited). By comparison, subsidies to Amtrak are close to 30 cents a passenger mile and subsidies to most high-speed rail lines will be much more.

America 2050 concludes by saying, “Intercity buses provide a valuable service and are an important part of a complete and balanced transportation system.” Who can argue with “balanced”? With respect to buses, America 2050 would give the high-use transport corridors—the cream of any transport service—to subsidized rail, leaving the dregs to buses (which would then require subsidies to serve those dregs).

The question is: How do you measure “balanced”? Apparently, America 2050’s answer is “balanced means taking the fees you pay to drive and spending them on my favored mode of transport while you sit stuck in traffic.” By contrast, my answer is: if it can be done without subsidies, it is balanced. Let’s just end the subsidies to all modes of transportation and see what happens.

How’s that Big-Government Environmentalism Workin’ For Ya’?

I don’t know what conclusion the correspondent who sent me this pair of articles meant for me to draw, but I think they nicely illustrate how centralizing power with the federal government fails to advance environmental values, while eroding others.

First, there’s the AP story showing deep and extensive ties between offshore oil and gas companies and the Bureau of Ocean Energy Management, Enforcement and Regulation. That’s the renamed Minerals Management Service, the agency that was supposed to prevent things like the Deepwater Horizon oil spill last summer.

Everyone dreams of a “real regulator” that will clean up industry, protect public values, and smartly manage economic activity. What you routinely end up with is a pro-industry self-dealing agency that fails to protect the values it was assigned while mismanaging productive activity. Case in point.

Next, woe be it to the environmental activist who goes monkey-wrenching government-industry plans. Tim DeChristopher has been sentenced to two years in prison and fined $10,000 for derailing a government auction of oil and gas leases near two national parks in Utah. DeChristopher ran up bids on 13 parcels totaling more than 22,000 acres near Arches and Canyonlands national parks, then failed to make good on his bids.

I suspect I would find DeChristopher’s environmentalism at least overwrought, but when did it become a criminal offense to default on an auction bid? When the government got into the business, that’s when. Instead of, say, pre-qualifying bidders, it evidently just uses its monopoly on coercion to lock up people who mess around with its action.

Command-and-control is probably the simplest way to advance environmental values, but it has failed so dramatically so many times, and it fosters a punitive state that jails its citizens. The simplest way to advance environmental goals may not be the best.

If you prioritize the environment, and if you’ve read this far in this post, I suspect you might be willing to consider more harmonious ways of pushing for a greener planet, ways that respect and use private property rights and that don’t put people in jail. Free-market environmentalism exists, though it’s a ways off from here.