Topic: Energy and Environment

The Economist’s Flawed Backgrounder on Climate & Development

The Economist’s print edition has published my letter taking it to task for a pretty uninformed piece it published on the impacts of climate change last month. Although the editors changed the title, dropped the references which I furnish reflexively, and is somewhat briefer, the printed version is for the most part quite faithful to the spirit of the original.  For the benefit of readers interested in checking my statements and going beyond the “he said, she said” nature of most exchanges on the opinion pages of newspapers and magazines, my original letter is here.

New Paper: Why Sustainability Standards for Biofuel Production Make Little Economic Sense

The U.S. sustainability standard currently requires ethanol production to emit at least 20% less CO2 than the gasoline it is assumed to replace. In a new study, authors Harry de Gorter and David R. Just argue that sustainability standards for ethanol are, by definition, illogical and ineffective. Moreover, say de Gorter and Just, those standards divert attention from the contradictions and inefficiencies of ethanol import tariffs, tax credits, mandates, and subsidies, all of which exist whether ethanol is sustainable or not.

An Omen in the Cash for Clunkers Results

Chris Edwards is right. Tad DeHaven is right. Cash for Clunkers was a shell game and an utter waste of taxpayer money. But C4C offers another teachable lesson, which is that the 35.5 mile per gallon by 2016 fuel efficiency standard will kill General Motors.

In just the latest example of government policies working at cross-purposes, the president buys a 60 percent stake in GM at a cost to taxpayers of $50 billion (conservatively), and simultaneously supports a mandate—in the rigid CAFE standard—that will severely handicap GM, while assisting the competition.

C4C gave consumers the opportunity to express their preferences in the high mileage vehicle market, and GM failed miserably. Consumers of high mileage vehicles prefer Toyotas, Hondas, Fords, Nissans and Hyundais, whose offerings comprise the top ten best sellers list under the program. Not a single GM (or Chrysler) product made the top ten under C4C.

GM’s competitive strength is in the luxury car, muscle car, SUV, and pick-up truck categories. But to sell those cars in 2016, GM will need to sell many, many more small cars than it does now to achieve an average fleet fuel efficiency of 35.5 mpg. So, while GM’s competitors are free to target the gas-guzzling market because there is already plenty of demand for their high-mileage vehicles, GM’s capacity to compete where it is strongest will be conditioned on its ability to cultivate an obviously very skeptical market for its small cars. And that bodes very poorly for GM’s future.

For more on GM’s future and the damage done to important U.S. institutions, like private property rights, the rule of law, the free enterprise system, and the proper separation of economy and state as a result of the Bush/Obama auto intervention, you are welcome to join us for a policy forum at Cato on October 15 at noon.

The Emperor’s Green Clothes

According to Thursday’s New York Times, “the Obama administration announced on Wednesday that it was moving forward on new rules to regulate greenhouse gas emissions from hundreds of power plants and large industrial facilities.”

President Obama has said that he prefers a comprehensive legislative approach to regulating emissions and stemming global warming, not a piecemeal application of rules, and that he is deeply committed to passage of a climate bill this year.

But he has authorized the Environmental Protection Agency to begin moving toward regulation, which could goad lawmakers into reaching an agreement.

In the book that popularized the phrase “the Imperial Presidency,” historian Arthur Schlesinger Jr. focused overwhelmingly on the vast growth of presidential power in foreign affairs. But as an inveterate New Dealer, Schlesinger had a blind spot where it came to the Emperor’s burgeoning powers at home.

The Supreme Court’s virtual abandonment of the nondelegation doctrine after 1935 paved the way for the modern administrative state, in which Congress all too eagerly cedes legislative power to the executive branch. As the Obama administration’s latest actions on global warming show, the Imperial Presidency comes in green, too. From my column in the Washington Examiner this week:

James Madison believed that there could be “no liberty where the legislative and executive powers are united in the same person.” And yet, here we are, with those powers united in the person of a president who has pledged to heal the planet and stop the oceans’ rise.

The Times article makes clear that Obama won’t push his authority under the Clean Air Act (or the Supreme Court’s interpretation thereof in Mass. v. EPA) as far as he might, yet: “By raising the standard to 25,000 tons, the new rule exempts millions of smaller sources of carbon dioxide emissions like bakeries, soft drink bottlers, dry cleaners and hospitals.” Instead, the administration plans to use its power under the CAA as a hammer to hold over Congress’s head, pushing it to act on cap and trade.

But eventually, Obama could push that authority even further. According to a comprehensive legal analysis issued by NYU Law School’s Center for Policy Integrity“if Congress fails to act, President Obama has the power under the Clean Air Act to adopt a cap-and-trade system.” (Emphasis mine). (Note in the link above that Matt Yglesias, dedicated opponent of Bush’s war-on-terror executive power grabs, doesn’t seem exactly upset at the prospect of cap-and-trade via executive fiat.)

True, such a move would be litigated to death, and the forests of paperwork it would generate might result in a carbon footprint larger than whatever it abated. Nonetheless, we ought to be disturbed by the notion that in a democratic country the president could make such a move without an up or down vote from Congress. And, as I suggest in the Examiner piece, it ought to make conservatives question their longtime conviction that presidential control over administrative agencies is a reliable method for decreasing the country’s regulatory burden:

After 9/11, the phrase “unitary executive theory” (UET) came to stand for the idea that the president can do whatever he pleases in the national security arena. But it originally stood for a humbler proposition: UET’s architects in the Reagan administration argued that the Constitution’s grant of executive power to the president meant that he controlled the executive branch, and could therefore rein in aggressive regulatory agencies.

In an era when Republicans held a virtual lock on the Electoral College, that idea had some appeal. But as Elena Kagan, now President Obama’s Solicitor General, pointed out in a 2001 Harvard Law Review article, there’s little reason to think that “presidential supervision of administration inherently cuts in a deregulatory direction.”

… [A]s Kagan notes, after the Democrats lost control of Congress in 1994, President Clinton used his regulatory authority unilaterally to show progress, pushing “a distinctly activist and pro-regulatory agenda.” As Obama’s popularity erodes, he may come to like the idea of being the “decider.”

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