Topic: Energy and Environment

A Novel Interpretation of “Green Tariffs”

Here’s a nice follow up to my blog post on Tuesday: firms importing solar panels to the United States face a $70 million bill because of unpaid duties.

It seems to me that a government truly concerned about global warming–putting aside the merits of that position–would want to encourage the adoption of solar panels, including by keeping them as cheap as possible. Nor, I would have thought, is this the time to add more fuel to the fire that is starting to characterize the U.S. trade relationship with China. There’s plenty enough fuel for that already.

Finally, a Pro-Trade Proposal on Climate Change

One of the main recommendations in my recent paper on climate change and trade was to reduce trade barriers on “environmental goods and services.” Trade liberalization in this area is slated for special attention in the Doha round of multilateral trade negotiations, but progress there is decidedly unimpressive.

I’m under no illusion that this development had anything to do with my recommendations, but it seems that the 30 member countries of the Organization for Economic Cooperation and Development are attempting a trade deal amongst themselves and China to expedite tariff reductions in “climate friendly” goods (more here).  Apparently it is designed to be an incentive to get Beijing on board for a global climate deal, but of course American consumers and businesses would gain from cheaper and better access to green technology, too.

I would, of course, prefer that U.S. lawmakers see the value in reducing tariffs on all goods without waiting for the other OECD members to catch on, but surely this development is better than the alternative.

Climate Change and Health Care: Free Lunches?

In the debate over health care reform, advocates of expanded government health insurance suggest we can pay for this by making Medicare and Medicaid more efficient.

In Paul Krugman’s most recent column, he makes a similar claim about reducing greenhouse gas emissions:

The evidence suggests that we’re wasting a lot of energy right now. That is, we’re burning large amounts of coal, oil and gas in ways that don’t actually enhance our standard of living — a phenomenon known in the research literature as the “energy-efficiency gap.” The existence of this gap suggests that policies promoting energy conservation could, up to a point, actually make consumers richer.

Both claims of a “free lunch” are heroic, at best.

In the case of health insurance, Medicare and Medicaid are inefficient, but to make them more efficient we have to reduce government subsidy for health insurance, not expand it.

In the case of energy efficiency, more energy-efficient practices exist (e.g., replacing incandescent light bulbs with CFLs), but they are expensive: if they actually made consumers richer, most would be using them already.

Now the fact that expanded government health insurance and increased energy efficiency would cost more, not less, does not prove they are bad ideas (that’s a separate discussion). But it means society must evaluate a tradeoff, not just assert we can have something for nothing.

C/P Libertarianism, from A to Z

Bob McDonnell: The Modern Republican

This is from the Reagan administration’s deregulatory 1981 energy plan: “All Americans are involved in making energy policy. When individual choices are made with a maximum of personal understanding and a minimum of government restraints, the result is the most appropriate energy policy.”

Many modern Republicans claim devotion to Ronald Reagan’s ideas, but they often seem to forget about the “minimum of government” thing. The following points are from Republican Virginia gubernatorial candidate Bob McDonnell’s “More Energy, More Jobs” plan:

  • “McDonnell was the chief sponsor of legislation creating the Virginia Hydrogen Energy Plan.”
  • “McDonnell also supported grant programs for solar photovoltaic manufacturing, tax exemptions for solar energy and recycling property, and tax credits for solar energy equipment.”
  • “In order to protect Virginia’s citizens from the skyrocketing wholesale prices of electricity seen in other states, McDonnell brought together all the necessary stake holders to re-regulate electricity in Virginia.”
  • “Currently, Virginia is the second largest importer of electricity behind California.  This is unacceptable.”
  • “Bob McDonnell will establish Virginia as a Green Jobs Zone to incentivize companies to create quality green jobs. Qualified businesses would be eligible to receive an income tax credit equal to $500 per position created per year for the first five years.”
  • “The Virginia Alternative Fuels Revolving Fund was established to assist local governments that convert to alternative fuel systems … Bob McDonnell will expand the purpose of this fund to include infrastructure such as refueling stations, provide seed money and aggressively pursue additional grants.”
  • “Bob McDonnell will make Southwest and Southside Virginia the nation’s hub for traditional and alternative energy research and development…To assist with the attraction, building and operation of major energy facilities in Southside and Southwest Virginia, we will also support the establishment of the Center for Energy.”
  • “To help Virginia universities gain access to federal stimulus money, as Governor, Bob McDonnell will establish the Virginia Universities Clean Energy Development and Economic Stimulus Foundation.”
  • “As Governor, Bob McDonnell will leverage stimulus funding to incentivize individuals and businesses to conduct energy audits and encourage public private partnerships between small businesses and government.”

It’s true that McDonnell’s plan has some free market elements, and also that Ronald Reagan supported some wasteful energy boondoggles. However, the degree to which the modern Republican wants to micromanage and manipulate the energy industry is remarkable. McDonnell is almost setting out a Soviet five-year plan for a substantial part of the Virginia economy. For goodness sakes, he wants to treat Virginia like a separate country and try to fix the supposed problem that it is “importing” too much energy from other states!

It’s not just energy. Look at the top-down central planning ideas that McDonnell has for “creating jobs”:

  • “Expanding use of the Governor’s Opportunity Fund by roughly doubling the funding available and broadening Fund rules to allow companies that generate additional state and local tax revenue to qualify.”
  • “Appointing Lieutenant Governor Bolling to serve as “Virginia’s Chief Job Creation Officer” in the McDonnell/Bolling Administration.”
  • “Designating one Deputy Secretary of Commerce to Focus Solely on Rural Economic Development.”
  • “Providing a $1,000 tax credit per job to businesses that create 50 new jobs, or 25 new jobs in economically distressed areas.”
  • “Double the funding for the Virginia Tourism Corporation. Currently Virginia trails 14 states including West Virginia and Tennessee in tourism funding.”
  • “Increase funding for the Governor’s Motion Picture Fund by $2 million.”
  • “Providing a $1,000 tax credit per job to businesses that create 50 new jobs, or 25 new jobs in economically distressed areas.”

Again, McDonnell mixes some pro-market proposals in with these Big Government interventions. And his opponent, Creigh Deeds, is promoting his own interventionist schemes, many very similar to McDonnell’s.

In 1980, the difference between Jimmy Carter and Ronald Reagan on economic policy was clear. But today, we seem to have arrived at a point where it’s virtually impossible to tell the difference in economic platforms between a self-proclaimed conservative Republican and a liberal Democrat.

Borlaug the Great

the greatNorman Borlaug, the father of the Green Revolution, has died at 95. Ron Bailey calls him “the man who saved more human lives than anyone else in history.” In an as-yet-unpublished letter to the New York Times, Don Boudreaux reflects:

By saving millions of people from starvation, green-revolution father Norman Borlaug arguably has done more for humanity than has any other human being of the past century (“Norman Borlaug, 95, Dies; Led Green Revolution,” Sept. 13). Yet unlike Sen. Kennedy’s, his death will go relatively unnoticed. He’ll certainly not be canonized in the popular mind.

Alas, in our world, melodramatic loud-mouths thunder to and fro in the foreground, doing little of any value while stealing most of the credit for civilization. Meanwhile, in the background, millions upon millions of decent, creative people work diligently at their specialties - welding, waiting tables, performing orthopedic surgery, designing shopping malls, researching plant genetics - each contributing to the prosperity of the rest. Some contributions are larger than others (as Dr. Borlaug’s certainly was), but even a contribution as colossal as his is quickly taken for granted, any notice of it submerged beneath the self-congratulation, swagger, and bellicosity of the politicians who pretend to be prosperity’s source. How wrong.

In 1992 the late Senator Kennedy said, “The ballot box is the place where all change begins in America.” I wrote a few years later that he was “conveniently forgetting the market process that has brought us such changes as the train, the skyscraper, the automobile, the personal computer, and charitable or self-help endeavors from settlement houses to Alcoholics Anonymous to Comic Relief.”

Some day a history book will describe Bill Clinton as “a scandal-ridden president in the age of Bill Gates.” Or maybe “in the age of the Green Revolution.” Either way, the biggest changes in our lives – certainly the biggest improvements – will have come from scientists, inventors, and businesses, not from politicians.

But that’s not the way journalists and historians see it. Just think of the people who have gone down in history as “the Great”: Alexander the Great, Catherine the Great, Charles the Great (Charlemagne), Frederick the Great, Peter the Great – despots and warmongers. Just once it would be nice to see the actual benefactors of humanity designated as “the Great”: Galileo the Great, Gutenberg the Great, Samuel Morse the Great, Alan Turing the Great.

So just for tonight, drink a toast to one of the great benefactors of the poorest people in the world, Borlaug the Great.

A Harsh Climate for Trade

Although it has very much taken a back-seat to health care, and a press report [$] today say it could be bumped down yet another notch on the administration’s hierarchy of goals, climate change is shaping up to be a major battle if the others don’t prove to be prohibitively exhausting. So today I am weighing in on the debate by releasing my new paper on the dangers of using trade measures as a tool of climate policy.

The Democrats were keen to pass a climate change bill in advance of the December meeting in Copenhagen designed to agree on a successor regime to the Kyoto protocol, which expires in 2012.  However, opposition from a number of quarters and the fear of health-care-town-halls-mark-II has cooled their heels. Senate leaders have pushed back the deadline for passing bills out of committees a number of times.

The reason why climate change legislation has become so controversial is that businesses and consumers are, quite understandably, fearful about any policies that threaten to increase their costs. I’ll leave it to others to blog about the effect of emissions-reductions policies on jobs and profits, but even the fear of losses has led to calls for special deals for “vulnerable industries”, in the form of free emission permits and/or protection from imports that are sourced from countries that purportedly take insufficient steps to limit emissions.

H.R. 2454, the so called Waxman-Markey bill passed by the House in June, contains both free permits and provisions for carbon tariffs. I’ve blogged before about the efforts of trade-skeptic senators to introduce the same kinds of protections in the senate bill. To that end, Sen. Sherrod Brown (D, OH) is reportedly meeting with Sen. Barbara Boxer, Chairwoman of the Senate Environment and Public Works Committee next week about trade protections for manufacturing industries.  As my paper makes clear, I think these efforts are misguidedly ineffective at best, and harmful at worst.

I’m looking forward to discussing these issues in more detail tomorrow at a Hill briefing in Washington DC. Registration for the event was closed very early because of overwhelming demand, but you can watch the event when the video becomes available on the Cato website.

Fire! Fire! Fire!

fireIt’s summer again, which means it is the time of year for the obligatory photos of wildfires in Southern California. This particular fire, known as the Station Fire, nearly doubled in size in the last 24 hours from 98 to 164 square miles. So far, it has burned at least 18 buildings and cost the lives of at least two firefighters.

The fire began in the Angeles National Forest, and Congress will no doubt respond by giving the Forest Service even more money to suppress such fires in the future. In fact, as I show in my Cato Policy Analysis, The Perfect Firestorm, the Forest Service has, in effect, a blank check to put out fires.

It freely uses that blank check. It has so far spent about $14 million fighting the Station Fire, which supposedly threatens 12,000 homes. But it has also spent $2.5 million on Oregon’s Canal Creek Fire, which is less than half a square mile in size and does not threaten any homes or other structures. Better safe than sorry — as long as you have a blank check.

Southern California forests are extremely fire prone — their natural fire regime is to completely burn over every 50 to 100 years. Building homes in such an area might seem foolish, so naturally there have been calls for “fire plain zoning,” similar to flood plain zoning, that would restrict such construction.

FlintridgeIn fact, properly designed homes and landscaping can easily withstand such fires. Most homes destroyed by wildfires are ignited either by burning embers landing on flammable roofs or by the radiant heat from trees or   grasses burning nearby.  Building homes with nonflammable roofs and eves, and landscaping with well-tended lawns and a minimum of flammable trees essentially makes homes fireproof.

Most civilian deaths from wildfire take place during evacuations, not from the fire itself. Homes that are designed to withstand wildfires are known as “shelter-in-place” homes because the residents will be safer in the homes than trying to evacuate.

In 2007, CBS News reported that a fire swept through two San Diego suburbs built to shelter-in-place standards, and “not one home was even touched by flames.” Perversely, the reporter concluded that people should not be allowed to build to those standards because it would just encourage them to live in fire-prone areas.

In reality, the lesson is that it would be a lot less expensive to promote shelter-in-place construction standards and retrofitting and then simply let the fires burn at their normal frequencies. The homes would be safe, the forests would be “natural,” and fewer firefighters would be at risk.

Why doesn’t this happen?

Simple: money. The Forest Service gets a blank check for putting out fires, but almost no money for helping people fireproof their properties. So it continues to spend billions on fire suppression, mainly to protect people’s homes, when a lower-cost strategy is readily available.

Photo credit: MB Trama and DisneyKrazie on Flickr.