WonkLine: June 5, 2009
The New York Times reports that “cows at 15 farms across Vermont have had their grain feed adjusted to include more plants” instead of corn and soy, reducing their enteric methane emissions (burps) by 18 percent, without any loss in milk production.
“President Obama may attend world climate talks in Copenhagen this December, marking the first visit to the annual U.N. conference by a sitting U.S. president since George H.W. Bush’s 1992 trip to Rio de Janeiro,” according to House Majority Leader Steny Hoyer (D-MD).
The Washington Post finds that “corporate lobbyists have won billions of dollars of subsidies in the Waxman-Markey green economy legislation, including $500 billion for electric utilities and $12 billion for the auto industry.
WonkLine: June 3, 2009
From the Wonk Room.
“Climate change could spark ‘environmental wars’ in the Middle East over already scarce water supplies and dissuade Israel from any pullout from occupied Arab land,” a report from the International Institute for Sustainable Development warns: “In a region already considered the world’s most water scarce, climate models are predicting a hotter, drier and less predictable climate.”
“A recession, the worst GDP drop since the 1950s, is the wrong circumstance, the wrong backdrop to introduce legislation that would revolutionize the energy economy in this country,” said Rep. Artur Davis (D-AL), who has “urged House Democratic leaders and the Obama administration to ditch the cap-and-trade provisions until the economy picks up.”
Two different coalitions of agriculture lobbies have asked House leadership to modify the agricultural and forestry carbon offsets program in Waxman-Markey (H.R. 2454).
Whitehouse: Senate Inaction Influenced by Carbon Polluter Lobbyists
From the Wonk Room.
Sen. Sheldon Whitehouse (D-R.I.), in a Senate hearing on the EPA budget Tuesday morning, decried the extraordinary amount of spending by corporate global warming polluters to lobby Congress. Reading from a report on new lobbying disclosures, Whitehouse noted that carbon polluters such as electric utilities and oil and gas companies have spent nearly $80 million on lobbying just in the first quarter of 2009. Whitehouse concludes:
So if we wonder why the Senate is the last place in America that still doesn’t get it – that climate change is a real problem for people and that carbon pollution is something that people should pay for when they emit it, big utilities, big industry – gee, connect the dots.
Watch it:
They’d like to just dump it and have it be somebody else’s problem. There’s absolutely nothing new about that. Polluters don’t want to pay. What’s new is our understanding of what the costs are of carbon pollution. Economic costs, environmental costs, wildlife and habitat costs, and as we’ve recently learned, very significant national security costs.
The E&E News story Whitehouse entered in the Congressional Record explains how carbon-industry lobbyists are vastly outspending environmental groups and clean energy companies:
Thus far in 2009, all environmental groups combined have spent a grand total of $4.7 million on lobbying, according to the Center for Responsive Politics. The Nature Conservancy, which has spent $850,000 thus far, tops the list.The various renewable energy companies have spent a grand total of $7.5 million, with the biggest spender there being the American Wind Energy Association which has spent just over $1.2 million.
By comparison, Exxon Mobil Corp. alone has spent more than $9.3 million in the first few months of 2009. The company’s lobbying totals exceed any other single corporation or organization except the U.S. Chamber of Commerce, which has spent a total of $15.5 million.
The chamber, which has been by far the single biggest lobbying force in Washington over the last decade, has likewise been active in the energy debate this year, though it is unclear from the disclosure records what amount
- if any -the organization has spent on lobbying of lawmakers. Its totals are not included in the calculations for any energy-specific industries.Other heavyweights in the energy sector include: Chevron Corp. at $6.8 million, ConocoPhillips at $6 million, BP at $3.6 million and Marathon Oil at $3.4 million. All four are among the 20 biggest lobbying spenders in any sector in the first few months of 2009, according to the Center for Responsive Politics.
As for electric utilities, the biggest single lobbying spender is Southern Co. at $3.7 million, followed by the Edison Electric Institute at $2.6 million, American Electric Power Co. Inc. at $1.7 million and Exelon Corp. at $1.54 million.
WonkLine: May 11, 2009
From the Wonk Room.
The House Natural Resources Committee is holding a field hearing today “to discuss the responsible expansion of solar energy in California and across the nation” at the University of California, Riverside Palm Desert Graduate Center.
The New York Times discusses the Intervale Green complex, a “new, green, low-income housing development” by the Women’s Housing and Economic Development Corporation with 128 units, “a large, glass-windowed lobby, two green roofs and a sculpture-filled courtyard.”
Rep. John Shimkus (R-IL), Heritage Foundation, Americans for Tax Reform, and local op-eds in North Carolina and Louisiana repeated the “just wrong” lie that an MIT study found cap and trade is a $3100 tax.
Specter Joins Conservative Democratic Bloc on Climate and Energy
From the Wonk Room.
Pennsylvania’s Sen. Arlen Specter, who announced his switch from the Republican to the Democratic Party today, will remain a key swing vote in a Senate locked by GOP filibusters on green economy legislation like cap and trade, renewable energy standards, and green jobs programs. Specter will be joining a bloc of conservative Democratic senators who are publicly skeptical of President Obama’s clean energy agenda, and who have repeatedly voted against Obama’s proposal to place limits on global warming pollution:
- Supporting a filibuster for green economy legislation
- Roll call votes #125, 126, and 164.
- Requiring that green economy legislation not affect the cost of energy production or use
- Roll call votes #116, 117, and 169.
Ideologically, Specter is in line with Democrats like Sen. Evan Bayh (D-IN), who worries that Obama’s clean economy proposal may “suck money” from his state, Sen. Mary Landrieu (D-LA), who is “against forcing petrochemical companies” to “bear the brunt of new costs,” and Sen. Ben Nelson (D-NE), who worries cap and trade “could have a negative impact on our economy.”
Specter, whose top donors include the electric utilities Exelon Corporation and PPL Corporation, has told Pennsylvania students that “his main platform in running for re-election is global warming.”
WonkLine: April 28, 2009
From the Wonk Room.
Although Interior Secretary Ken Salazar made it clear he “likes coal,” the Interior Department “said on Monday it will try to overturn a Bush administration rule that made it easier for coal mining companies to dump mountaintop debris into valley streams.”
As Arctic carbon dioxide levels are growing at an “unprecedented rate,” an “area of an Antarctic ice shelf almost the size of New York City has broken into icebergs this month.”
Speaking about the Waxman-Markey clean energy bill, Rep. Gene Green (D-TX) called for free pollution permits to petroleum refiners and Rep. G. K. Butterfield called for free pollution permits to electric distribution companies. These companies have given more than $375,000 to energy committee members in the first three months of 2009.
MIT Analysis of Carbon Policy Further Misinterpreted by Weekly Standard
From the Wonk Room.
John Reilly’s April 14th letter to Rep. John Boehner (R-OH). Reilly explains that the GOP continues to misrepresent his study, which found that annual price for the average household for strong cap and trade would start at $65 in 2015, averaging “about $800” through 2050.
While $800 is significantly more than Reilly’s original estimate of $215 (not to mention more than Obama’s middle-class tax cut), it turns out that Reilly is still low-balling the cost of cap and trade by using some fuzzy logic. In reality, cap and trade could cost the average household more than $3,900 per year.
In reality, the energy economist from the Massachusetts Institute of Technology who co-authored the “Assessment of U.S. Cap-and-Trade Proposals” report does a better job of interpreting “reality” than McCormack. It’s McCormack’s logic that is “fuzzy.”
$3100?
The MIT study estimates the average value of the carbon market over a thirty-five year period to be $366 billion per year. If you were to divide that value by the number of households in America, you get $3,128 per household. Asserting that the value of the market is equivalent to the economic cost of the policy – which one has to do to claim that the cost of cap and trade is $3100 per household— requires the assumption that this revenue stream magically disappears somewhere. Reilly attempted to explain this to the Weekly Standard:
It is not really a matter of returning it or not, no matter what happens this revenue gets recycled into the economy some way. In that regard, whether the money is specifically returned to households with a check that says “your share of GHG auction revenue”, used to cut someone’s taxes, used to pay for some government services that provide benefit to the public, or simply used to offset the deficit (therefore meaning lower government debt and lower taxes sometime in the future when that debt comes due) is largely irrelevant in the calculation of the “average” household. Each of those ways of using the revenue has different implications for specific households but the “average” affect is still the same.
For example: Exxon Mobil became the largest corporation in the world by raking in $442.9 billion in revenue in 2008, “costing” the average American household $3,785.
Is the existence of Exxon Mobil a $3,800 tax on American families? No, because most of its revenues are redistributed in the economy—as oil rig employment, petroleum products (which fuel transportation and trade), and of course, multimillion-dollar salaries for its top executives and massive profits for its shareholders.
$3900?
The MIT study of the economic effects of cap and trade did estimate the “welfare cost” of the transition from an unsustainable pollution-based economy to a clean-energy economy. As Reilly explained to McCormack (to no avail), this cost to the economy involves all those actions people have to take to reduce their use of fossil fuels or find ways to use them without releasing [greenhouse gases]>
So that might involve spending money on insulating your home, or buying a more expensive hybrid vehicle to drive, or electric utilities substituting gas (or wind, nuclear, or solar) instead of coal in power generation, or industry investing in more efficient motors or production processes, etc. with all of these things ending up reflected in the costs of good and services in the economy.
The MIT study found that this “welfare cost” is tiny with respect to the size of the economy, even with strong reductions in global warming pollution and a very high price for carbon permits. The change in total welfare is less than one-tenth of one percent in 2015, never rising above two percent for the forty-year run of their model. Averaging out the “price” of a clean-energy economy versus the status quo over those forty years, Reilly found the cost for “the average household just in 2015 is about $80 per family, or $65 if more appropriately stated in present value terms,” and the “present value cost per average current household through 2050” is “about $800.”
McCormack decided to add $3100 to $800 and get $3900, even though Reilly told him one has to assume the carbon market value gets flushed down the toilet:If you took the revenue and flushed it down the toilet or burned it, the cost would then be the Republican estimate plus the cost I estimate. But that is quite unrealistic, as the auction revenue will be recycled into the economy some way.
Using McCormack’s logic, we could take our $3,800 Exxon Mobil “tax” and then add in, say the $855 per household per year spent on the war in Iraq (given a lowball estimate of $100 billion in total expenditures per year) as the welfare cost of the existence of Exxon Mobil. Adding $3785 to $855 returns a figure of $4640 per average household.
Saying “Exxon Mobil is a $4640 tax” would be silly and intellectually irresponsible. But that’s essentially what McCormack is doing, as is the once-respected Heritage Foundation, who is promoting McCormack’s nonsensical $3900 figure.
THE AVERAGE HOUSEHOLD?
The actual costs and benefits to individual consumers is dependent on how the policy is constructed. As Reilly explained in his April 14 letter, “the burden on lower income households can be offset through the use of auction revenues.” The cost of building a green economy could be paid entirely, in fact, by the richest one percent of the United States, for example – those whose income has nearly tripled in the last thirty years of our pollution-based economy while the bottom 80 percent has seen an increase of only 20 percent.
A cap-and-trade market involves only the corporations who own the power plants, oil refineries, and large factories that are responsible for the covered emissions. Any “cost” for the “average household” can only be derived from a model of how corporations pass costs onto consumers. This is not a simple one-to-one process, as both the House Republicans and McCormack assert. For example, the MIT study found that oil companies enjoy significant economic “rent” – in other words, undeserved profits – because of factors like the inflexibility of production with respect to consumption, the lack of fuel switching in the transportation sector, and the existence of oil cartels. Carbon regulation acts “in effect like a monopsony buyer that extracts some of the producer rent,” substituting the undeserved profits of companies like Exxon Mobil with public revenues.
To calculate the macroeconomic cost of carbon regulation, economists compare a model of the economic status quo with a model that implements the effects of a cap and trade system. As the MIT study warns, pulling out “precise numerical results” from these models is dangerous:Given the many assumptions that are necessary to model national and global economic systems, the precise numerical results are not as important as the insights to be gained about the general direction of changes in the economy and components of the energy system and about the approximate magnitude of the price and welfare effects to be expected given alternative features of cap-and-trade design.
Reilly’s $800 estimate does not explain how, say, a family earning $36,000 in Toledo would be affected in 2015, or how their electricity or gas bills would change. What this figure does indicate, however, is that the cost of rebuilding our economy to end our dependence on Exxon’s oil and avoid catastrophic global warming is on the order of a dollar a day per person.
THE SAFE STATUS QUO?
The biggest lie of McCormack’s piece, putting aside the deliberate refusal to accept economics 101, comes from the assumption that staying on a pollution-fueled path is cost-free. The MIT study, like other economic models of the cost of new policy, fails to factor in the significant health benefits of reducing fossil-fuel pollution, and most significantly ignores that the level of greenhouse gas emissions in the reference case would lead to catastrophic global warming, with out of control floods, storms, wildfires, droughts, and sea level rise, mass extinction and international insecurity.
Furthermore, no attempt was made to model the economic benefits to either the nation at large or to individuals of the mandate for technological innovation. The shift from a pollution-based economy requires the widescale deployment of modern technologies. The new pathways of economic growth that follow are difficult, if not impossible, to model accurately. The cost of being left behind in the race to develop twenty-first century technologies by clinging to nineteenth-century fuels is similarly difficult to model. So most economists don’t make the attempt.
WonkLine: April 24, 2009
From the Wonk Room.
As a wildfire in Myrtle Beach on the South Carolina coast “spread over thousands of acres by early Friday” and a “7,500-acre-plus blaze” raged in South Florida, scientists reported that “wildfires spur climate change, which in turn makes blazes bigger, more frequent and more damaging to the environment.”
Rep. Gene Green (D-TX), who “represents a district with several oil refineries, a huge source of greenhouse gas emissions, said about the Waxman-Markey clean energy bill, “they have to get our votes, and I’m not going to vote for a bill without refinery allowances.”
Sen. John Barrasso (R-WY), a prominent coal industry advocate, asked administration nominees whether they agreed with comments this week by Jon Wellinghoff, chairman of the Federal Energy Regulatory Commission, that no new nuclear or coal plants may ever be needed in the United States.
WonkLine: April 22, 2009
From the Wonk Room.
On Earth Day, President Obama is visiting a “wind turbine manufacturer in Iowa” to “champion his push to cap greenhouse gas emissions and boost renewable alternatives to fossil fuels,” as top officials testify before Congress on behalf of action on green jobs for a green future.
Oil-patch and Blue Dog Democrats like Gene Green (D-TX) and Jim Matheson (D-UT) yesterday called for subsidies for the oil and nuclear industries to be added to the Waxman-Markey clean energy bill, while criticizing federal renewable energy and energy efficiency standards.
Sen. Ben Nelson (D-NE) criticized the Environmental Protection Agency for taking initial steps to obey a Supreme Court mandate to regulate global warming pollution, saying, “if alphabet agencies can do what they want without regard to what Congress believes, there’s something wrong with the system.”
Study: China Spending $12.6 Million Every Hour Greening Their Economy
From the Wonk Room.
A new report from the Center for American Progress points out that the United States is slipping behind other nations in the development and deployment of clean energy and efficient infrastructure even as China spends $12.6 million every hour greening their economy.
Read the full study here.
China, as part of their two-year stimulus plan, is poised to spend 3% of their GDP a year on public investments in renewable energy, low-carbon vehicles, high-speed rail, an advanced electric grid, efficiency improvements, and other water-treatment and pollution controls. This is about $12.6 million every hour. In the United States, the American Recovery and Reinvestment Act invests about half as much as China on comparable priorities. This represents less than half of one percent of our 2008 gross domestic product.
The paper also shows that, when it comes to preparing our country to compete in the new energy economy of the future and create millions of new jobs, the United States lags behind most of our competitors in the rest of the world in a four key ways.
- We have no national energy portfolio standard that encourages clean, renewable power and shifts away from dirty and dangerous energy.
- We have an outdated electrical grid unsuited for the task of carrying energy from regions rich in wind, solar, and geothermal potential to the people who need the energy.
- We don’t make dirty energy companies pay for the pollution they pump into the air; in fact, we give them billions every year in tax breaks.
- And we don’t invest enough in research, development, and deployment to inspire our entrepreneurs and leverage their discoveries by helping bring their bold new technologies to market.
As venture capitalist John Doerr recently pointed out in his testimony before the Senate Committee on the Environment and Public Works, “What is at stake is whether America will be the worldwide winner in the next great global industry, green technologies.”