Topic: Energy and Environment

John McCain: Out of Energy

Today, Senator John McCain will formally announce that he is a candidate for president of the United States. Which reminds me that on Monday, Senator McCain gave a speech at the Center for Strategic and International Studies on what federal energy policy would look like under a McCain administration. So is the omnipresent captain of the “Straight Talk Express” prepared to tell Americans things they might not want to hear about energy? Apparently not. An examination of the speech suggests that we may need to rename McCain’s campaign bus the “Hot Air Express.” Let’s look at this speech and deconstruct it line by line.

Thank you. I appreciate the invitation to talk with you about a great and urgent challenge - breaking our nation’s critical dependence on foreign sources of oil, and making America safer, stronger and more prosperous by modernizing the way we generate and employ energy.

Oil is often called the lifeblood of our economy–the indispensable commodity that keeps commerce humming and America on the move. But, in today’s world, our dependency on foreign oil and the way we use hydrocarbons is a major strategic vulnerability, a serious threat to our security, our economy and the well being of our planet.

While this is standard-issue political cant, it pays to dwell on the implication of what is being said. In essence, John McCain would have us believe that free trade is good for everything save energy. But why – what’s so special about energy? As best as I can tell, the grand “energy exception” exists because energy is so important that we dare not rely upon foreign sellers. But couldn’t the same thing be said about food, technology, etc? I must have missed that part of The Wealth of Nations where Adam Smith argued for the virtues of free trade for unimportant things but championed the case for protectionism when truly valuable commodities were in play.

Fortunately, there are times in a nation’s history when great challenges coalesce with great moments of opportunity. We are at such a moment today. We have the urgent need and the opportunity to build a safer and thriving future with more diverse, reliable, and cleaner energy. But it will take another indispensable commodity to make it happen -American leadership. I’m running for President to help provide that leadership. And I want to talk a little today about the direction I want to lead us and why.

Every single presidential candidate that I’m aware of is saying exactly the same thing when it comes to what America’s national energy policy ought to be. It’s as if they are all going to the same speech writer. There’s a reason for that. Politicians are in the business of ratifying public sentiments, and it there’s one thing the public believes these days, it’s that it would be great if we could find a cheap replacement for gasoline. Yes, that would be great. But government isn’t God.

Oil is a vital resource and we will always need it. But we account for 25% of global demand and possess less than 3% of proven reserves. Most of the world’s known reserves are in the Persian Gulf, in the hands of dictators or nationalized oil companies. Its availability and price are manipulated by a cartel of countries where our values aren’t typically shared and our interests aren’t their first priority.

Actually, we don’t know that. It turns out that academics have been trying to quantify OPEC’s impact on world crude oil markets for decades and have found no compelling evidence to support the contention that prices are higher because of OPEC than they would be absent OPEC.

By mid-century there will be three-and-a-half billion cars worldwide-over four times the number today. Most of the growth will take place in the developing world, in India and China, but the increase in fuel prices, pollution, and climate impacts will be felt worldwide. As world demand for oil soars, higher prices, severe economic volatility, and heightened international tensions follow.

Really? If we were to draw a line on a graph showing world oil consumption from 1900 to the present, and then we were to draw similar lines for crude oil prices, world GDP, and the number of cross-border conflicts, I guarantee you that oil consumption would correlate with economic growth but would not correlate with higher world crude oil prices or international conflict. A regression analysis would be required to settle the matter, but I’m pretty sure that, if I had the time to undertake one, we’d find that John McCain’s prediction about the future has no basis in past experience.

Regardless, increases in world oil consumption are manifestations of progress and improved human well-being. The fact that people in China, India, and elsewhere in the third world are now wealthy enough to buy cars and gasoline is good news, not bad.

These unpredictable forces could seriously circumscribe our future if we let them. Great nations don’t leave the “lifeblood” of their economy in the hands of foreign cartels or bet their future on a commodity located in countries where authoritarians repress their people and terrorists find their main support.

What is a “great nation” exactly? There must be many qualities that could earn a nation the adjective “great”; leadership in the arts, leadership in the sciences, leadership in wealth creation (GDP), or personal well-being (per capita GDP), leadership in military power, or, for the more ideologically minded, leadership in civic virtue (income equality for some, personal liberty for others). Now, I’m going to hazard a guess here that when John McCain refers to a country as a “great nation,” he’s either defining it as “a nation that would elect John McCain” or “a nation that can blast apart any other nation on earth.” By that criterion, is there a correlation between “great nations” and those that get all of their economically important commodities from within their own borders? No there isn’t. If we broaden our definition of “great nation” to those that meet other criteria of “greatness,” I ask again: Is there any correlation between economic independence and fine art and literature, per capita GDP, aggregate GDP, equality, or personal liberty? Again, no.

In reality, John McCain is making a tautological argument; “A great nation is one that does not rely on trade with others.” By this metric, Albania prior to the collapse of the Soviet block and North Korea today are the world’s greatest nations. Neither the United States – nor ancient Rome for that matter – would ever qualify under those terms.

Terrorists understand the seriousness of our vulnerability. Al Qaeda plans for attacks on oil facilities in the Middle East to destroy the American economy. A little over a year ago, a suicide attack at a major Saudi Arabian oil refinery came close to disabling its target. Had it succeeded, it would have driven the world price of oil above $150 dollars a barrel -and kept it there for a year.

Yeah, well, “If ‘ifs and buts’ were chickens and nuts, we’d all have enough for winter.” It turns out that it’s a lot harder for terrorists to disrupt the oil trade via targeted attacks than John McCain imagines. They’ve been at it for nearly a decade now and have nothing to show for their efforts.

We’re one successful attack away from an economic crisis. The flow of oil has many chokepoints - pipelines, refineries, transit routes, and terminals; most of them outside our jurisdiction and control. Our enemies understand the effects on America of a significant disruption in supply, a crippled transportation system, gasoline too expensive for many Americans to purchase, businesses closed.

Economists are increasingly of the opinion that oil price spikes have very little impact on the economy as a whole. Think about it – oil prices have almost tripled since 2002 (when oil prices averaged $22 per barrel) but the economy continues to hum along nicely.

Al Qaeda must revel in the irony that America is effectively helping to fund both sides of the war they caused. As we sacrifice blood and treasure, some of our gas dollars flow to the fanatics who build the bombs, hatch the plots, and carry out attacks on our soldiers and citizens.

Unless John McCain knows something we don’t, he’s just making this up as he goes along. We don’t know who’s running al Qaeda or where their high command happens to be, much less what their financial books look like.

Iran made over $45 billion from oil sales in 2005, and it is the number one state sponsor of terrorism.

Yeah, and Pakistan earned virtually nothing from international oil sales in 2005, but its military is probably the most dangerous sponsor of Islamic terrorism on the planet. But let’s go back to Iran. Even when sales revenue was less than half that of today (namely, during the entirety of the 1990s), Iran was busy setting up Hezbollah and Allah knows what else. There is no correlation between oil revenues and Islamic terrorism.

The transfer of American wealth to the Middle East helps sustain the conditions on which terrorists prey.

Actually, hatred of America in the Islamic world sustains the conditions on which the terrorists prey. And in that regard, John McCain – because of his support for the war in Iraq if nothing else – is almost certainly more responsible for Islamic terrorism than ExxonMobil.

But let’s go back to McCain’s contention that drying up the flow of petrodollars going into the Middle East would reverse “the conditions on which terrorists prey.” I don’t think that’s true. What terrorists need most is a recruiting pool from which to draw. If the United States were to reduce oil consumption to such an extent that profits for oil producers declined, oil states would have smaller economies and less to distribute to their underemployed youth. To the extent that deteriorating economic conditions breed social discontent and political resentment, it’s not so obvious to me that reducing oil profits reduces Islamic terrorism. And that’s particularly the case when oil profits are being reduced as a consequence of a policy with a stated intention of bankrupting the economies of the Middle East. Has it not occurred to John McCain that this would almost certainly increase the recruitment pool for Islamic terrorists and make matters worse if we accept that manpower, not money, is the chief limiting factor for terrorist activities? Has our stated policy of strangling the revenues available to the Cuban government increased or decreased the pool of anti-American citizens of Cuba?

Some of the most oil-rich nations are the most stagnant societies on earth. As long as petro-dollars flow freely to them those regimes have little incentive to open their politics and economies so that all their people may benefit from their countries’ natural wealth.

Does anyone seriously think that if the oil revenues dried up that Saudi Arabia, Kuwait, Bahrain, the UAE, and Iran would go happily into that market liberal night? Gee, what do Islamic countries without oil revenue – like Egypt, Syria, Pakistan, and Afghanistan – look like?

The Middle East’s example is spreading to our own hemisphere. Venezuela’s Hugo Chavez is using his country’s oil revenues to establish a dictatorship, bully his neighbors and succeed Castro as Latin America’s leading antagonist of the United States.

Sad but true. Score one valid point for John McCain. But there’s little the United States can do to deny significant oil revenues to producing states. Our ability to radically reduce world crude oil prices via public policy is routinely overstated. The U.S. is just one actor of many in a global crude oil market in which prices are determined by global supply and demand. Sure, we could ban the internal combustion engine and thus cut world crude oil demand by something like 20 percent, but is it worth throwing our economy into a depression just to bring Venezuela’s oil revenues back to 1990 levels?

The politics of oil impede the global progress of our values, and restrains governments from acting on the most basic impulses of human decency.

Not necessarily. “The politics of oil” didn’t impede the development of the United States throughout the first six decades of the 20th century. Few today remember that the United States once dominated the world crude oil market to the same extent Saudi Arabia does today. There’s no iron link between crude oil extraction and human rights violations.

There is only one reason China has opposed sanctions to pressure Sudan to stop the killing in Darfur: China needs Sudan’s oil.

That and the fact that China has no interest in promoting a global bias against human rights violations for reasons that should be obvious to John McCain. Regardless, China doesn’t need Sudan’s oil – it needs oil. Sudanese oil is no better than anyone else’s. If Sudan is willing to cut China a better deal in return for foreign policy favors, what are we supposed to do about it?

The burning of oil and other fossil fuels is contributing to the dangerous accumulation of greenhouse gases in the earth’s atmosphere, altering our climate with the potential for major social, economic and political upheaval. The world is already feeling the powerful effects of global warming, and far more dire consequences are predicted if we let the growing deluge of greenhouse gas emissions continue, and wreak havoc with God’s creation.

Oil consumption has less to do with global warming than does coal consumption, but alas, politicians find it more convenient to lay global warming at “Big Oil’s” feet than at the feet of “Big Coal.” That’s probably because it’s politically safer to attack the oil industry than the coal industry. Declare war on coal and you declare war on coal miners and coal towns. That might very well cost you battleground states such as Pennsylvania, West Virginia, Tennessee, and Ohio … and thus, the presidency. Declare war on oil, on the other hand, and you’ll probably get a bump in your fundraising efforts in California with no obvious downside to speak of.

A group of senior retired military officers recently warned about the potential upheaval caused by conflicts over water, arable land and other natural resources under strain from a warming planet.

Exactly what expertise do military officers bring to the global warming policy table? Military officers specialize in killing great numbers of people in an organized and efficient fashion. How does that skill set translate into specialized knowledge about atmospheric physics, climatological impacts of a warmer and wetter world, and/or the socio-political responses to the same?

The problem isn’t a Hollywood invention nor is doing something about it a vanity of Cassandra like hysterics. It is a serious and urgent economic, environmental and national security challenge.

According to the “best and the brightest” within the global academy, global warming ranks near the bottom of human worries.

National security depends on energy security, which we cannot achieve if we remain dependent on imported oil from Middle Eastern governments who support or foment by their own inattention and inequities the rise of terrorists or on swaggering demagogues and would be dictators in our hemisphere.

What does this mean? Canada is a net exporter of oil, which suggests that McCain would deem Canada “energy secure.” America imports lots of oil, so we’re not. If national security depends on energy security, then Canada has relatively more “national security” than the United States. I can spin out even more insane comparison if you like, but I think you get the point.

There’s no doubt it’s an enormous challenge. But is it too big a challenge for America to tackle; this great country that has never before confronted a problem it couldn’t solve? No, it is not. No people have ever been better innovators and problem solvers than Americans. It is in our national DNA to see challenges as opportunities; to conquer problems beyond the expectation of an admiring world. America, relying as always on the industry and imagination of a free people, and the power and innovation of free markets, is capable of overcoming any challenge from within and without our borders.

We’ve been trying mightily to achieve energy independence ever since the Nixon administration, but we’re as far away from our goal as ever. John McCain can pat us on the backs all he likes, but he’s not the first do so – or the first to argue that a little “can-do” spirit can solve everything from oil dependence to drug use.

Our enemies believe we’re too weak to overcome our dependence on foreign oil.

Look, I’m not asking for Cicero, but can’t American politicians employ better rhetoric than this?

Even some of our allies think we’re no longer the world’s most visionary, most capable country or committed to the advancement of mankind.

They think that because politicians like Sen. McCain are so popular in the United States. Need I remind John McCain that our allies’ loss of faith has to do largely with our embrace of a foreign policy straight out of the John McCain playbook?

I think we know better than that. I think we know who we are and what we can do. Now, let’s remind the world.

Yes, let’s impress the world regarding how well we’ve learned the lessons taught by France; give the politicians full power to dictate who makes what in our economy and let her rip!

George Gershwin wrote that good music reflects its people and times. “My people are Americans,” he said. “My time is today.” That’s what made his music memorable. That’s what made all America’s best accomplishments memorable. We were capable and confident, we aspired to greatness and we understood our times. Our time is today, my friends, and the achievements of our storied past will shine no brighter than those we accomplish right now, in our time, if we meet our problems confidently and honestly; if we trust in the strength and ideals of free people; if we aspire to greatness.

Reagan he isn’t.

As President, I’ll propose a national energy strategy that will amount to a declaration of independence from the fear bred by our reliance on oil sheiks and our vulnerability to the troubled politics of the lands they rule.

Even if we imported no Persian Gulf oil whatsoever, a supply disruption there would increase the price of crude oil everywhere in the world no matter where it is produced.

When we reach the limits of military power and diplomacy to contain the dangers of that cauldron of burning resentments and extremism, energy security is our best defense. We won’t achieve it tomorrow, but we must achieve it in our time.

If energy security is our best defense against terrorism, then how do we explain the fact that Great Britain is being menaced by Islamic terrorists? Great Britain, after all, is a net exporter of oil. If energy independence is the thin blue line between us and the terrorists, then it’s not proving to be much of a defense.

The strategy I propose won’t be another grab bag of handouts to this or that industry and a full employment act for lobbyists. It will promote the diversification and conservation of our energy sources that will in sufficient time break the dominance of oil in our transportation sector just as we diversified away from oil use in electric power generation thirty years ago; and substantially reduce the impact of our energy consumption on the planet. It will rely on the genius and technological prowess of American industry and science.

There is no way for McCain to pursue his vision without providing “another grab bag of handouts to this or that industry.” Market actors are currently rejecting alternatives to oil in the transportation sector. The only way to change that reality is to provide subsidies to oil’s competitors.

Government must set achievable goals, but the markets should be free to produce the means. And those means are within our reach.

Whether government “must set achievable goals” or not depends upon your vision of government. In short, should decisions about what I drive be made by me or some politicians? As far as whether these “goals” that McCain is promoting are within our reach depends on what the goals are and how much we’re willing to pay to meet them. Unfortunately, he’s silent on both of those fronts.

Energy efficiency by using improved technology and practicing sensible habits in our homes, businesses and automobiles is a big part of the answer, and is something we can achieve right now. And new advances will make conservation an ever more important part of the solution. Improved light bulbs can use much less energy; smart grid technology can help homeowners and businesses lower their energy use, and breakthroughs in high tech materials can greatly improve fuel efficiency in the transportation sector. We need to dispel the image of conservation that entails shivering in cold rooms, reading by candlelight, and lower productivity. Americans have it in their power today to contribute to our national security, prosperity and a cleaner environment. They understand the dangers we face, and are prepared to respond to appeals to patriotism that explain how we can free ourselves from them.

If energy conservation makes sense, people will conserve energy of their own accord. Amazing how that works.

We need not wait for another age, in which science fiction becomes every day reality. Flexible-fuel vehicles aren’t futuristic pie in the sky. We can easily deploy such technology today for less than $100 per vehicle; and we must develop the infrastructure necessary to take full advantage. We were able to overcome the challenges of putting seatbelts, airbags, and computer technology in practically every car. We can provide fuel options and improve the fuel efficiency of our vehicle fleet by making them out of high tech materials that improve their strength and safety. We are doing that very thing right now to beat our foreign competitors in the aerospace industry.

Who’s this “we”? Is John McCain running for President of the United States or overseer of all national business and industry?

Alcohol fuels made from corn, sugar, switch grass and many other sources, fuel cells, biodiesel derived from waste products, natural gas, and other technologies are all promising and available alternatives to oil. I won’t support subsidizing every alternative or tariffs that restrict the healthy competition that stimulates innovation and lower costs. But I’ll encourage the development of infrastructure and market growth necessary for these products to compete, and let consumers choose the winners. I’ve never known an American entrepreneur worthy of the name who wouldn’t rather compete for sales than subsidies.

The old John McCain opposed ethanol subsidies. The new John McCain will apparently embrace any idea to win the White House.

America’s electricity production is for the most part petroleum free, and the existing electric power grid has the capacity to handle the added demand imposed by plug-in hybrid vehicles. We can add more capacity and improve its reliability in the years ahead. Nuclear energy, renewable power, and other emission free forms of power production can expand capacity, improve local air quality and address climate change. I’ll work to promote real partnerships between utilities and automakers to accelerate the deployment of plug-in hybrids.

Why don’t we just nationalize the car companies and get it over with?

With some of the savings from cutting subsidies for industries that can stand on their own, we can establish a national challenge to improve the cost, range, size, and weight of electric batteries for automobiles. Fifty percent of cars on the road are driven 25 miles a day or less. Affordable battery-powered vehicles that can meet average commuter needs could help us cut oil imports in half. The reward will be earned through merit by whomever accomplishes the task, whether a laboratory in the Department of Energy, a university, a corporation or an enterprising young inventor who works out of his family’s garage.

See, we’re just not trying hard enough. We can all drive to work in hot-rod golf carts if we just put our mind to it.

Seriously though, don’t you think there is sufficient profit incentive to produce such technology now? This strike me as akin to doubling the bounty on bin Laden’s head. Nothing wrong with that, but it’s not likely to lead to his capture any sooner.

There is much we can do to increase our own oil production in ways that protect the environment using advanced technologies, including those that use and bury carbon dioxide, to recover the oil below the wells we have already drilled, and tap oil, natural gas, and shale economically with minimal environmental impact.

The United States has coal reserves more abundant than Saudi Arabia’s oil reserves. We found a way to cut down acid rain pollutants from burning coal, and we can find a way to use our coal resources without emitting excessive greenhouse gases.

We know how to do that. We just don’t know how to do that cheaply.

We have in use today a zero emission energy that could provide electricity for millions more homes and businesses than it currently does. Yet it has been over twenty-five years since a nuclear power plant has been constructed. The barriers to nuclear energy are political not technological.

Politicians don’t stand in the way of new nuclear power plants. Investment bankers do. That’s because the total cost of nuclear power is substantially greater than the total cost of other sources of electricity.

We’ve let the fears of thirty years ago, and an endless political squabble over the storage of nuclear spent fuel make it virtually impossible to build a single new plant that produces a form of energy that is safe and non-polluting.

Even the Nuclear Energy Institute disagrees with this. At a Manhattan Institute conference on March 28 of this year, Richard Myers, vice president of NEI, argued that America’s inability to site a high level radioactive waste disposal facility has nothing to do with the reluctance to build new sites. I know that because I was there on the panel with Mr. Myers.

If France can produce 80% of its electricity with nuclear power, why can’t we? Is France a more secure, advanced and innovative country than we are? Are France’s scientists and entrepreneurs more capable than we are? I need no answer to that rhetorical question. I know my country well enough to know otherwise.

If France can have a 35 hour work week, why can’t we? If France can guarantee that no person is fired with a damned good reason, why can’t we? If France can guarantee all of its citizens a robust income for life whether they work or not, why can’t we? The reason France has a lot of nuclear power is because French politicians make the decisions about what kind of power plants are built in France, not French investors or businessmen. In America, we leave more decisions to the market than does Europe.

Seriously, I don’t think that Republicans will take well to an argument that France should be the metric by which all American domestic policy is judged. But maybe I’m wrong about that.

Let’s provide for safe storage of spent nuclear fuel, and give host states or localities a proprietary interest so when advanced recycling technologies turn used fuel into a valuable commodity, the public will share in its economic benefits.

I want to improve and make permanent the research and development tax credit. I want to spend less money on government bureaucracies, and, where the private sector isn’t moving out of regulatory fear, to form the partnerships necessary to build demonstration models of promising new technologies such as advanced nuclear power plants, coal gasification, carbon capture and storage, and renewable power so we can take maximum advantage of our most abundant resources.

Maybe the private sector “isn’t moving” towards John McCain’s preferred sources of energy because it makes zero economic sense. Energy demonstration projects, by the way, have a long record of failure in the United States. All that has been demonstrated is that the technology in question isn’t ready for prime time – something market actors managed to figure out without a dime of taxpayer money.

And I’ll make it a national mission to develop a catalyst capable of breaking down carbon dioxide into useful chemical building blocks, and rendering it a new source of revenue and opportunity.

So many national missions, so little time. Where do you think this will be – or should be – on President McCain’s “to-do” list were he to find himself in the Oval Office?

America competes in a global economy where innovation and entrepreneurship are the pillars of prosperity. The competition is stiff and the stakes are high. We have the opportunity to apply America’s technological supremacy to capture the export markets for advanced energy technologies, reaping the capital investment and good jobs it will provide. Our innovators, scientists, entrepreneurs and workers have the knowledge, resources, and drive to lead the way on energy security, as we have in so many other world-changing advancements. The race has always been to the swift, and America must be first to market with innovations that meet mankind’s growing energy and environmental needs. Again, government should set the standards, and leave it to the marketplace to win the race.

It’s difficult to read that paragraph without concluding that John McCain sees no real boundary line between government and industry. They are both one – or need to be made one – to work in concert.

I have proposed a bipartisan plan to address the problem of climate change and stimulate the development and use of advanced technologies. It is a market-based approach that would set reasonable caps on carbon and other greenhouse gas emissions, and provide industries with tradable credits. By reducing its emissions, a utility or industrial plant can generate credits it may trade on the open market for a profit, offering a powerful incentive to drive the deployment of new and better energy sources and technologies; for automakers to develop new ways to lower pollution and increase mileage; for utilities to generate cleaner electricity and capture carbon; for appliance manufacturers to make more efficient products, and for the nation to use energy with maximum efficiency-building conservation into the economy in a manner that produces financial and environmental benefits. Dupont Corporation has reaped $2 billion dollars in energy savings and reduced its carbon emissions by 72% since 1990.

As it always does, the profit motive will attract the transformational power of venture capital, and unleash the market to move clean alternative fuels and advanced energy technologies from the margins into the mainstream.

FYI, economists at Resources for the Future – a rather non-ideological bunch who likewise endorse greenhouse gas emission reductions – report that John McCain’s plan would likely increase electricity prices by at least 35 percent, and probably more.

Some urge we do nothing because we can’t be certain how bad the problem might become …

That is, they stubbornly point out that we don’t know enough about the costs associated with warming to ensure that any policy we adopt actually passes a cost-benefit test.

… or they presume the worst effects are most likely to occur in our grandchildren’s lifetime.

Actually, that’s true and there’s not a scientist alive who thinks industrial emissions are the primary drivers of warming who would argue to the contrary.

I’m a proud conservative …

“Conservative” apparently means something quite different than it did when I was a boy.

… and I reject that kind of live-for-today, “me generation,” attitude. It is unworthy of us and incompatible with our reputation as visionaries and problem solvers.

But it speaks well for our ability to undertake simple math. Even if global warming were to cut GDP by 10% a year (that is, about 10 times the best estimates at present), that would mean per capita incomes 100 years hence will likely be $289,515 rather than $321,684 assuming a 2 percent annual increase in per capita income, which is a relatively safe bet given past trends. In short, our grandchildren are going to be much, much wealthier than we are – just as we are much wealthier than our grandparents were in 1907.

Would John McCain ever propose a $440 a year tax on those making $44,000 (that’s what per capita incomes were last year) to generate benefits for those making $289,000 (per capita incomes in 2106 under worse case scenarios related to global warming) if this sort of policy were advanced in any other context?

Americans have never feared change. We make change work for us.

That’s so vacuous let’s turn it around. So what if the planet gets a few degrees warmer over the next couple of centuries? Americans have never feared change. We make change work for us. That’s actually a pretty defensible argument given that climate change is unlikely to effect the American economy very much at all. It will have a much more negative effect on our global competitors.

In the coming months, other proposals will be offered to establish a national climate policy. I welcome this. But let’s not let urgency breed rashness and irresponsibility. I claim no monopoly on the best answers. Let the marketplace of ideas flourish. But as there is great reward in the responsible policy, there’s also enormous risk in the wrong way forward. The policy must include mechanisms to control costs and protect the economy. Just as there is danger in doing too little, there is peril in going too far, too fast, in a way that imposes unsustainable costs on the economy. I believe “cap and trade” is the best way to manage cost and maximize benefits, but we must look at other market-based means to give added assurance that our policies are an instrument of job creation, economic progress, and environmental problem solving.

Economists are almost in complete agreement that “cap & trade” is poor way to go about this exercise if we want to reduce industrial greenhouse gas emissions. Carbon taxes would be far preferable. The reason politicians embrace the former but eschew the latter is because voters will not support climate control policies that impose significant costs on them. Hence, politicians need to endorse policies that impose few visible costs on voters.

Climate change is a global problem that requires a global solution. But we know America has both an obligation and a compelling national interest in fulfilling our historic leadership role. China’s carbon emissions will soon exceed ours. As President, I will invite a collaborative relationship with China to make coal use cleaner and climate friendly. But, we should address the problem on our terms, and bring others into the fold of a common sense effort to solve it, while we sell to the world the technologies needed to do it.

If John McCain has some secret plan to convince China to stop building cheap coal-fired power plants (that is, to stop growing), then I will be quite impressed. If current trends continue, within the next 25 years, China will emit twice as much greenhouse gases as the United States, Europe, Japan, and all other industrial nations combined.

Answering great challenges is nothing new to America. It’s what we do. We built the rockets that took us to the moon not because it was easy but because it was hard. We’ve sent space probes into the distant reaches of the universe. We harnessed nuclear energy, mapped the human genome, created the Internet and pioneered integrated circuits that possess the computing power of Apollo spacecraft on a single silicon chip you can barely see. In twenty years we’ve gone from using this cell phone (SHOW), a $4000 toy for the wealthy, to this cell phone (SHOW), an inexpensive and virtually universal means of communication. We can solve our oil dependence. You can’t sell me on hopelessness. You can’t convince me the problem is insurmountable. I know my country. I know what we’re capable of. We’re capable of unimaginable progress, unmatched prosperity, and vision that sees around the corner of history. We’ve always understood our times, accepted our challenges and made from our opportunities, another better world. My people are Americans. Our time is today. That is the country I ask to lead.

Yes, if we wish something into existence, government can make it so. God bless that straight-talkin’ John McCain! Now, to be fair, this same intellectual horse-whipping could be administered to every single energy speech being given by every single candidate running for the presidency. So in that spirit, consider these comments as the standard-issue rebuttal to everything you’re about to hear on the campaign trail re our “addiction to oil.”

Multi-Millionaire Singer Proposes Toilet Paper Restrictions

Al Gore’s histrionics are amusing, but nothing he has said compares to Sheryl Crow’s proposal to restrict how much toilet paper can be used. Perhaps there can be a new monitoring bureaucracy to search our homes. Maybe government agencies can stand guard in public restrooms. The BBC reports on the latest in cutting-edge environmentalism:

Singer Sheryl Crow has said a ban on using too much toilet paper should be introduced to help the environment. … The 45-year-old…has just toured the
US on a biodiesel-powered bus to raise awareness about climate change. …The pair targeted 11 university campuses to persuade students to help combat the world’s environmental problems. … “I have spent the better part of this tour trying to come up with easy ways for us all to become a part of the solution to global warming,” Crow wrote. …”I propose a limitation be put on how many squares of toilet paper can be used in any one sitting.”

Crow’s publicists managed to get the BBC to reference her biodiesel bus, but her environmental bona fides do not stand up under closer scrutiny. exposes the demands she makes when going on tour:

The rock star’s performance contract includes specific day-to-day instructions on what kind of booze Sheryl needs in her dressing room (TSG has never seen such attention to detail in any other concert rider we’ve posted). … promoters are directed to purchase specific booze depending on what day of the week the concert falls, as the below rider excerpt reveals. Additionally, when the global warming warrior hits the road, her touring entourage (and equipment) travels in three tractor trailers, four buses, and six cars. Now that’s a carbon footprint!

More Negative Consequences of Government Intervention

Many writers, including Cato experts, have noted the negative economic consequences of ethanol subsidies. While the direct effects are bad, government intervention also has negative indirect effects. As the UK-based Times notes, the subsidies are driving up the price of corn, hurting not only poor Mexicans but also American meat buyers:

Typically, meat production in the United States rises by about 2 per cent a year, but the pressure from American ethanol producers manufacturing road fuel from corn has sent the price of maize soaring to $4 a bushel. The USDA is predicting that the 2006 corn crop will sell for an average of $3.10 a bushel at the farm gate, the highest for a decade. Faced with extortionate feed costs, cattle and poultry farmers are rearing fewer animals and slaughtering them early. That means a sudden reversal in the annual meat production gain, representing a fall of 1.7lb per person. “There is a new demand component,” Shayle Shagam, a livestock analyst at USDA, said. “Livestock producers have to bid against the ethanol industry to get supplies of corn.” The biofuel revolution’s unpleasant negative consequence was first felt south of Rio Grande, when the escalating price of corn affected a food staple. Mexico’s tortilla inflation crisis is spreading north to the heartland of rib-eye steak and chicken wings. The USDA predicts that food prices will rise by up to 3.5 per cent this year as farmers rein in output in response to feedstock costs.

The Search for a Limited-Government Candidate Continues

Newt Gingrich, who continues to vigorously – though unofficially, so he can do it with million-dollar donations – campaign for president, appeared in Washington yesterday at what was billed as a debate with John Kerry on global warming. Some conservatives, disillusioned by the prospect of choosing among Rudy Giuliani, John McCain, and Mitt Romney, have looked to Gingrich as an actually Reaganite candidate. He should have dispelled those thoughts yesterday.

Instead of disagreeing with Kerry, Gingrich said that global warming is a problem and that “we should address it very actively.” He raved about Kerry’s book on the environment. He refused even to disagree with Kerry over the urgency of government action. Perhaps most un-Reaganesquely, he declared that while he preferred tax incentives to government mandates, “I am not automatically saying that coercion and bureaucracy is not an answer.”

There’s a Republican mantra for the new century.

The Sound of No ‘Peak’ Story Popping

Last week, in a Capitol Hill press conference featuring congressmen Roscoe Bartlett (R-Md.) and Tom Udall (D-N.M.),  the Government Accountability Office unveiled a new report on the looming catastrophe the United States faces from “peak oil.” With gas prices up and environmental stories popping in the press, Bartlett, Udall, and the GAO had to be thinking they’d have a hit on their hands.

So, if a GAO report falls on Capitol Hill and the media ignores it, does it count as news?

I can find no coverage of the press conference or the report in either the New York Times or the Washington Post. The only mention of it on either of those papers’ websites is in a transcript of an online chat session with Post politics reporter Lois Romano, wherein a reader asks if the Bartlett-Udall press conference will generate buzz.  Romano’s response (in essence): What press conference?

In fairness, the report did get a bit of play: the AP moved a short story on it and the WSJ briefed it. But no one is interviewed in either story, and the two pieces have the whiff of being quickly typed up from a press release. In other words, the media decided the report didn’t merit any real attention.

Peak oil, if you’ve never heard the term, is the theory that oil, as a finite resource, will grow increasingly difficult and expensive to extract over time. At some point, the global extraction rate will peak and then decline because of the increasing cost and difficulty.

The GAO report investigates the theory and comes up with three scintillating conclusions (I’m paraphrasing):

(1)  The world will indeed reach an oil peak — in the next few years, or the next 15 years, or the next 35 years, or the next 70 years, or sometime in the 22nd century.

(2)  It’s currently unclear how the United States will adjust to declining production rates when they do occur.

(3)  We’re all doomed, doomed I tellz ya’!

OK, (3) is hyperbolic — but just a tiny bit.

The notion of peak oil gained currency back in the early 1970s, a little more than a decade after geophysicist Marion King Hubbert correctly predicted that (Lower-48) U.S.-produced oil would peak around 1970. (Peak oil theory is often referred to as “Hubbert’s peak.”)

But Hubbert wasn’t the first person to come up with the concept. The notion dates at least to 1875 (yes, 1875) when John Strong Newberry claimed the oil peak was imminent. From then on, there’ve been many versions of the same refrain: The End (of oil) is nigh.

In respect to Newberry, Hubbert, Bartlett, Udall, and all the other “end is nigh” guys, there is validity to their theory. At some point in the future, the rate of global oil production will max out and then begin to decline. And it’s quite possible that we may not have cheap and easy substitutes for oil when that occurs, so there’ll be some significant changes for the world. But it’s also quite possible that we’ll develop substitutes for oil long before the cost of extraction, by itself, produces an oil peak; instead, the peak would result from our preferring — and thus shifting to — the substitutes. After all, that’s what has produced many previous natural resource shifts.

But let’s assume the former scenario plays out. Does that mean we are, indeed, doomed? And should we thus adopt the GAO report’s two policy recommendations that the U.S. government (1) carry out a massive global information-gathering effort to determine when the oil peak will occur, and (2) orchestrate a bold, unified national program to prepare for the peak oil transition to substitutes?

Let’s consider the policy recommendations first. Given the U.S. government’s track record on determining Iraq’s supply of weapons of mass destruction, how wise would it be to rely on the government to estimate the future supply of known and unknown sources of oil in Iraq, Iran, Saudi, Nigeria, Russia, Kuwait, Syria, Venezuela, China, Cuba, under the world’s oceans, etc.? How reliable would be government projections of the future technological developments that will increase human abilities to access that oil? Moreover, given that the U.S. government’s only great success in developing and broadly implementing an alternative energy program is nuclear power, do we really want it to be orchestrating a national program for a major transition to new energy sources? (I won’t mention the risk that the government, in carrying out these policies, would “fix” its findings and efforts around various politicians’ agendas.) If we are solely dependent on government to save us from the ruination of peak oil, then we probably are doomed.

So, does this mean that we should do nothing? Quite the opposite, quite the opposite — we should, and already are, acting boldly on energy. There are countless scientists, engineers, business executives, economists, and others, both in the United States and abroad, exploring and developing all sorts of transition strategies and technologies to substitute for oil. And there are countless scientists, engineers, business executives, and others, both in the United States and elsewhere, who are exploring and developing strategies and technologies to extend the life of the oil we have yet to extract. And we consumers have the best (and only necessary) incentive to utilize those developments when it makes sense to do so — we have to pay for the oil and alternative energies that we use. Those dynamics are far broader, more powerful, and more effective than any government Great (Energy) Leap Forward would be.

Bartlett, Udall, and the GAO are correct to be thinking about peak oil. But realizing that oil will peak one day is only the beginning of a thoughtful policy discussion, not the clinching demonstration that immediate government action is necessary. The only necessary (and sufficient) government energy policy is to allow consumers, innovators and entrepreneurs the degrees of freedom to make their own energy choices and to experience the costs and benefits of those choices.

Government is not the sole enlightened, rational actor on the planet. (Some might say the word “sole” should be removed from the previous sentence.) Somehow, we need to get the politicians to discover that.

Supreme Court to EPA: Hurry Up and Wait?

Lots of news outlets have been describing the Supreme Court’s opinion in Massachusetts v. EPA along the following lines: “Supreme Court says global warming is bad; tells EPA to fix the problem.”

Is that right? Not really.

In fact, if you read between the lines of the majority’s decision, its not clear that it will alter EPA policy one jot or tittle.

“Regulation,” under the Clean Air Act, can take a number of forms: It can take the form of declaring aspirational emission standards. Or it can take more draconian forms, such as looming technology mandates and imminent implementation deadlines, backed by tough civil and criminal penalties.

Even assuming that, after the Court’s decision yesterday, the EPA has to “regulate” in the sense of promulgating some GHG emission standards, the Court’s decision leaves the EPA with ample room to argue that it can defer deciding when and how to implement those standards in light of the potentially high and uncertain costs of implementation.

Its true, of course, that some parts of the Clean Air Act prohibit the EPA from undertaking this sort of cost-benefit analysis. The parts of the CAA governing auto emission standards are, however, different. There, the EPA retains considerable discretion weigh costs and-benefits—particularly when it comes to the “when” and “how” of implementing emission controls. For example, as Justice Stevens notes, section 202(a)(2) of the CAA gives the EPA broad discretion to delay implementation of pollution controls to the extent that “the Administrator finds necessary to permit the development and application of the requisite [pollution control] technology, giving appropriate consideration to the cost of compliance within such period.” Put in plain English, that means that if the “costs” of developing effective pollution-reducing technologies are very large, and the pay off of this R&D is in the far-distant future, the CAA doesn’t require the EPA to implement its standards right away.

The Court’s opinion also reaffirms the great deference owed to the EPA’s decision not to enforce any standards that it might promulgate. In the words of Justice Stevens yesterday, an “agency has broad discretion to choose how best to marshal its limited resources and personnel to carry out its delegated responsibilities.” Given the breadth of discretion granted the agency to defer implementation under provisions like section 202(a)(2), and the costs and uncertainties associated with implementation, that deference may give the EPA very substantial room to defer—perhaps for a very long time—implementation of a federal GHG enforcement regime, freeing the EPA to deal with more immediate and pressing environmental problems.

Nor is analysis of the EPA’s leeway to delay implementation much different if, as some assume, the Court’s decision means that GHG emissions are also “pollutants” under CAA provisions dealing with “national ambient air quality standards.” True, in Whitman v. American Trucking Association, the Court held that the EPA must set NAAQS without regard to the costs of implementation. But in his concurrence in that case, Justice Breyer suggested that even CAA requirements governing national ambient air quality standards permit some modified cost-benefit analysis. He emphasized, for example, that when setting NAAQS, the EPA doesn’t have to eliminate “any health risk, however slight, at any economic cost, however great.” It is only required to eliminate “unacceptable” risks, defined as those that the public is not willing to tolerate at any cost.

New American car emissions count for only 6% of worldwide carbon dioxide emissions. Eliminating these emissions wouldn’t necessarily reverse global warming or even appreciably slow it—particularly given the dynamic nature of emissions in developing countries. Thus, its far from evident that the added global warming risks created by new American car emissions are “unacceptable” in the sense suggested by Justice Breyer.  On the face of the record, its also far from clear that the risks posed by other GHG-omitting sources in the U.S., such as stationary sources, are any more publicly “unacceptable” in the sense meant by Breyer, given uncertainty about the payoff of unilateral American remediation and given the cost and current feasibility of GHG control technology.

Ultimately, then, the key flaw with the EPA’s decision may not have been the outcome of that decision, or even the overarching reasons given by the EPA for its decision. The fatal flaw may have been only the conclusory nature of the reasons given by the EPA for its decision. For example, the EPA said that it wouldn’t act now because effective GHG-reducing technologies weren’t feasible at present and wouldn’t be feasible in the near future. But the EPA didn’t make any effort to quantify, or otherwise support with evidence, that feasibility assessment. Instead, it offered its conclusions as facts that courts must accept at face value—something five justices weren’t willing to do. But if the EPA can supplement its feasibility conclusions with at least some evidence, it may be able to pull at least one or two justices—most likely Breyer or Kennedy–into the dissenters’ orbit.

(This post is cross-posted at ScotusBlog).