Climate of Fear XXI.

Used to be, presidential candidates could just say “I stand for the principles of the Whig Party” and let it go at that.[1]  Now, a presidential election campaign requires candidates to lay out their plans for examination by voters.[2]

Hillary Clinton has begun to do so.  One key area is climate change.  Here she seeks to reach beyond the goals set by the Obama administration.  President Obama believed that emissions had to be reduced, so he ordered the EPA to use the Clean Air Act to issue regulations that would compel vehicles and power plants to cut emissions by 25-28 percent below the 2005 level by 2025, and by 80 percent by 2050.

According to many economists, a carbon tax would be highly effective in reducing emissions.  Indeed, the goals for 2050 and perhaps even those for 2025 can’t be reached without a carbon tax.  It would drive up the price of carbon fuels above the price of alternative fuels, creating a market demand for those alternative fuels.  This, in turn, would shift the terms for solar and wind energy while stimulating a demand for mass transportation.

However, it would hit hard on ordinary consumers by raising gas and electricity prices.  So, Ford F-150s, “Mommy vans,” and air conditioning would all become prohibitively expensive.[3]  Such voters would become angry, angry hippos and—in an act of false consciousness[4]—vote Republican.  Clinton has rigorously avoided proposing a carbon tax.

Conceding that the Democrats are unlikely to win control of both houses of Congress (perhaps not even one), she envisions acting on climate change without legislation.  Clinton believes that “meeting the climate challenge is too important to wait for climate deniers in Congress to pass comprehensive climate legislation.”[5]  She would use the Clean Air Act to issue regulations that would reduce emissions by airlines, oil refineries, gas wells, and cement plants.

What might such action accomplish?  She hopes to raise the number of solar panels from about 70,000 today to 500 million by 2020.  She wants to spend $60 billion on mass-transit and energy-efficient buildings.  Experts believe that the Obama Administration already has done just about everything that administrative regulations can achieve, even if the courts allow all of them to remain in effect.  Taken all together, her energy proposals will cut greenhouse gas emissions by 80 percent of the 2005 level by 2050.  That is, the same mark as that set by the Obama administration.  Furthermore, a Clinton administration would need to get at least $60 billion in appropriations through Congress.  This seems equally unlikely to be achieved.

Nevertheless, Clinton has won some support from the environmental community, which sees the danger of climate change as more pressing than any other danger.  “We know that [a carbon tax] is not politically realistic.  And we need to be realistic about what we can get,” said Scott Hennessey, vice president of the solar power company SolarCity.[6]

The real issue is the American unwillingness to be taxed, rather than “climate deniers.”

[1] See: https://www.youtube.com/watch?v=UAjwAuHHQJs

[2] Voters in long-established democracies realize that their own candidates are just writing a wish list, but they believe that the other candidate means to try for integral fulfillment of his/her agenda.

[3] Actually, they already are in environmental terms.  It’s just that on one wants to tell people the truth.

[4] See: https://en.wikipedia.org/wiki/False_consciousness

[5] Clinton’s campaign chairman John Podesta, quoted in Coral Davenport, “Clinton’s Climate Change Plan Avoids Mention of a Carbon Tax,” NYT, 3 July 2016.

[6] Which spent a measly $200,000 on the Podesta Group lobbying firm in 2015.  See: http://www.opensecrets.org/lobby/firmsum.php?id=D000022193&year=2014%20Campaign%20Contributions  This was not mentioned in the NYT article.  See n. 5 above.

Climate of Fear XI.

The International Energy Agency (IEA) issues reports on critical energy issues. It’s “Energy Technology Perspectives” reports offer an insight into climate change issues. So, is the glass half-full or is it empty?

The power industry produces almost 40 percent of America’s carbon dioxide emissions. There have been big technological gains in reducing greenhouse gas emissions. These improvements are what allowed President Obama to order a 30 percent reduction in emissions from a 2005 baseline by coal-burning power plants by 2030. (His recent agreement with the Chinese apparently merely ratified changes already underway.)

People have stopped believing in some of the alternative energy sources touted by environmentalists. All these technologies hold promise, but they are not yet anywhere near price competitive with carbon energy generation. Funding for things like bio-energy, offshore wind,[1] and geo-thermal dropped more than twenty percent between 2011 and 2013. It can be dangerous to extrapolate from brief periods of change. The price of photovoltaic solar cells dropped sharply from 2008 to 2012 because a land-rush of producers into the market led to savage price competition. The subsequent shake-out has led to a stabilization of prices. The “levelized” costs of solar energy generation have fallen by 40 percent from their 2010 estimate. Thus, as part of the stimulus, the Obama administration heavily subsidized alternative energy generation sources. As a result, in 2010, the US added 5 gigawatts of energy generation from wind-power; in 2011 it added 7 gigawatts; and in 2012 it added a whopping 13 gigawatts. The end of the stimulus left wind-power generation becalmed: in 2013, the US added only 1 gigawatt from wind-power, and 2014 isn’t shaping up to be much of an improvement. Lesson: in the current state of technology, alternative fuels are only competitive with carbon-fueled energy generation when the government “levels the playing field” by tilting it in one direction.

What are the real possibilities?

By 2019, onshore wind generation could cost $71/megawatt, “even without subsidies.” By 2040, in exceptionally windy places (Washington, DC?) the cost might be as low as $63.40/megawatt. By 2040 nuclear-generated power might cost $80.00/megawatt. By 2040 solar might generate power at $86.50/megawatt. None of this is going to amount to much.

The IEA predicts that by 2040 only 16.5 percent of energy will be produced from renewable resources. More than 65 percent will come from the burning of coal and gas. This means that “carbon capture” technology must develop rapidly. However, “carbon capture” technologies are failing to develop at an adequate pace. Costs are high relative to the return, so no one is interested in investing. Similarly, we need a 24 percent increase in nuclear power generation by 2025 to fend off drastic climate change.[2] Instead, nuclear generating capacity is falling.

The best solution to this problem is a severe carbon tax. Today the US emits about 5.4 billion tons of carbon dioxide. If carbon emissions were taxed at $25/ton beginning in 2015, with a 5 percent/year increase (i.e. rising to about $60/ton by 2040), lots of alternative energy sources would start to look more attractive—if not attractive.

Eduardo Porter, “A Carbon Tax Could Bolster Green Energy,” NYT, 19 November 2014.

[1] Migrating birds and drunken pleasure-boaters alike are happy about this.

[2] Build a lot of nukes in Maine. No one lives there and the winds aloft will carry the fall-out from the inevitable accident across the Atlantic to Portugal and Spain. Bad for the cork oaks and cod donuts I’ll grant you.

Climate of Fear II

Recently, the New York Times has published pieces by economists arguing that the costs of limiting climate change may be much lower than people have feared.

The Cornell economist Robert Frank has made a series of arguments in favor of vigorous action in responding to climate change. Some of them are more persuasive than are others.

First, the same people who argue that climate change isn’t certain also go to the dentist once a year. Why? Because fillings are cheaper than root canals. The same reasoning goes for the uncertain effects of an uncertain degree of climate change.

Second, the same people who want to protect capitalism from excessive regulation ignore that the market works really well. Raise the costs of pollution to producers and consumers and they will find lower-cost alternatives. Carbon taxes and cap-and-trade policies can cut pollution without pushing up over-all prices.

Third, we restrict the right of individuals to exercise their “individual liberty” when it would harm others. Same thing goes for discharging greenhouse gases.

Some of his arguments seem to come from cloud-cuckoo-land.

First, capitalism is “creative destruction.” If carbon-based industries get destroyed by prices that reflect their real costs to the environment, then investors will plow money into alternatives. What Frank fails to understand is what Catherine the Great tried to explain to Denis Diderot: “You write your reforms on paper; I must write them in human flesh.” Coal miners don’t easily convert to barristas. Look at what happened to British coal miners after the Thatcher government decided to close many inefficient coal mines. Boozing away their dole in the local.

Similarly, there are only a relatively small number of convicted felons or people discharged from mental asylums who want to obtain a permit to carry a concealed weapon, but lots of people drive cars. It is easy to restrict the rights of the former, but it will be hard to restrict the rights of the latter.

Second, what you lose on the swings you make up on the merry-go-round. That is, high taxes on pollutants would generate huge revenues that would allow other taxes to fall. What Frank fails to notice is that American taxation is highly progressive. The top one percent on tax-payers provide over a third of all income tax revenue, while the bottom fifty percent pay less than five percent. Raising gas taxes, for example, would penalize the vast majority of Americans while off-setting tax cuts would benefit the “one percent.” Good luck getting that through Congress.

However, the proponents of the carbon tax increase + other taxes decrease frankly acknowledge that the two have to run together to keep the tax effect neutral. If the carbon tax is increased without an offsetting reduction in other taxes, then it really is a significant additional cost for the economy.

Third, American leadership would give us the moral high-ground, while the threat of tariffs could be used to lever the Chinese and the Indians into following our lead. I suppose we could ask Vladimir Putin what he thinks of America’s moral high ground—and of economic sanctions.

In short, there are some interesting ideas on offer. However, the political bugs haven’t yet been worked out of the system.

Robert Frank, “Shattering Myths to Help the Climate,” New York Times, 3 August 2014.

Eduardo Porter, “The Benefits of Easing Climate Change,” NYT, September 2014.