Rahall is Not Doing Enough
“When coal takes a hit, so do West Virginia families, and the EPA’s anti-coal policies are having very real and devastating impacts on the state, including higher energy costs and lost jobs. But instead of protecting West Virginians from these threats, Congressman Rahall voted to shield the Obama Administration’s radical anti-coal agenda from the scrutiny of Congress. Rahall’s vote against reining in EPA’s regulatory power and his support for budgets that advance the carbon tax agenda prove that when push comes to shove, Nick Rahall stands with President Obama instead of standing up to him.
“President Obama’s war on coal is really a war on West Virginia families and Nick Rahall simply has not done enough to protect West Virginia from Washington’s anti-coal regulations.”
To view the ad, click here.
To read the fact sheet for the ad, click here.
###
German Government Distorts IPCC Report on Subsidies
The Global Warming Policy Foundation (GWPF) has caught the German government distorting the latest IPCC’s report on the effectiveness of “green” energy subsidies. The whole episode is just another example of how broken the IPCC process is. When it suits a group’s policy desires, they will quote from the IPCC. When the peer-reviewed science doesn’t support their desired positions, well, they’ll simply report the exact opposite—and still claim “the consensus” on their side.
The standard position of economists who work on climate change policy is that if one thinks that greenhouse gas emissions pose a “negative externality” deserving of some type of government response, then a carbon tax or cap-and-trade scheme will “internalize the externality” and market forces will take care of the rest. Now to be clear, there are problems with such an approach—the current author has published an extensive critique of this standard case for a carbon tax. But the point is, the default position among economists on this issue is that if you have a carbon tax or cap and trade system in place, then further interventions such as energy subsidies are completely useless.
This is what the IPCC reported, in its latest update. The GWPF blog post makes this point when it writes:
In its report the IPCC emphasises the futility of subsidies for renewable energy parallel to an emissions trading system: “The addition of a CO2 reduction policy to a second policy does not necessarily lead to greater CO2 reductions,” it says in a literal translation of the IPCC’s Technical Summary: “In an emissions trading scheme with a sufficiently stringent cap other measures such as subsidising renewable energy have no further influence on total CO2 emissions.”
Thus, the IPCC now confirms what the Scientific Advisory Board of the Federal Ministry of Economics, the Monopolies Commission or the President of the Ifo Institute, Hans -Werner Sinn, have been saying for years: Under the fixed cap of European emissions trading with its precisely calculated amount of pollution rights renewable energy subsidies only lead to a shift of CO2 emissions, but not to their reduction.
To reiterate, we do not agree that a European emissions trading scheme is good policy, but we recognize the standard economic point that if you have such a system up and running, then it makes no sense whatsoever to supplement it with government subsidies for “green” energy. No, one of the ostensible virtues of a carbon tax or a cap-and-trade system is that they are “market-based” solutions, which allow governments to address climate change in a flexible way, rather than imposing a top-down solution of picking winners and losers.
Yet that’s not the message the German government wants to convey, because it has plenty of vested interests who enjoy subsidies. So what did it do, in light of the awkward IPCC position? It simply reversed what the IPCC said, as the GWPF blog post explains:
Yet the IPCC’s clear verdict regarding the climate-political futility of green energy subsidies that run simultaneously to emissions trading does not appear in the German [government’s] summary. The only comment on this issue reads completely differently: “Emissions trading affects the impact of others measures, unless the number of allowed certificates are adjusted flexibly.”
The difference is obvious: the IPCC has declared CO2 emissions trading to be an effective instrument that makes subsidies for renewable energy unnecessary. The German [government’s] translation reverses this conclusion and makes emissions trading the culprit that allegedly “constricts the impact of other measures.”
This episode beautifully illustrates what the Heritage Foundation’s David Kreutzer explained at a carbon tax conference last summer: Governments cannot be trusted to “phase out” other anti-carbon policies, if only they could get a carbon tax or cap-and-trade scheme. This is a false promise made by the advocates of such schemes, either because they are naïve or because they have no problem bending the truth to achieve their political objectives.
We have the real-world example of Australia: When it imposed a carbon tax, its government didn’t abolish other types of interventions. Many of the most vociferous supporters of a carbon tax (or cap-and-trade scheme) have no intention of getting rid of gasoline taxes, power plant mandates, renewable fuel standards, or fuel economy standards. The German government’s recent chicanery with the IPCC report is just further evidence of this pattern.
No genuine fan of the free market should ever be fooled into “holding his nose” and supporting a tax or cap on carbon emissions, thinking that it will be part of a bargain that eliminates other interventions. On the contrary, we will just end up with the worst of both worlds: top-down planning of winners and losers, in addition to extra taxes.
IER Senior Economist Robert Murphy authored this post.
Federal Govt. is Using the Military to Provide Subsidies for Biofuel Producers
The Government Accountability Office (GAO) recently released a report which found that the military had spent up to $150 per gallon for alternative jet-fuel. This is one more example of how the administration is providing subsidies for renewable producers.
The latest GAO report found:
The federal government supports the development and use of alternative jet fuels through both broad and targeted initiatives. Broad national strategies promote the development of a variety of alternative fuels—including alternative jet fuel—to help achieve national goals, such as securing energy independence, fostering economic development, and reducing greenhouse gas emissions.
Of the three justifications the GAO gives for the federal government spending up to $150 a gallon subsidizing alternative fuels, the only one that is possibly true is a potential reduction in greenhouse gas emissions. The administration is not serious about securing energy independence nor are they serious about fostering economic development. Furthermore, the latest evidence shows that the alternative fuel actually increased greenhouse gas emissions.
If the administration were serious about energy security, then why are they subsidizing experimental products that may, potentially, increase energy security rather than taking concrete steps to actually increase energy security today? This is why the energy security argument does not makes sense.
The administration only leases 3 percent of federal lands for energy development. If the administration were serious about energy security, they would lease more lands and it would learn from the states how to increase oil production and protect the environment at the same time. On private and state lands, oil production has increased 61 percent over the last five years, but oil production has decreased by six percent on federal lands. This drop in oil production on federal land would not happen if the administration were serious about energy security.
The administration could also allow the Keystone XL pipeline to be built. Oil from Canada is just as secure as oil from the United States. If the administration were serious about energy security, they wouldn’t restrict oil from Canada. Instead, they would allow the Keystone XL pipeline to be built.
As for fostering economic development, again there is no evidence that the administration interested in fostering overall economic development. Buying fuel at above market rate is a waste of money. Wasting money does not foster economic development, instead it retards it. As Phillip Cross the former Chief Economic Analyst at Statistics Canada wrote:
Public sector investment never “kick-starts” more business investment, creating the virtuous circle governments always hope for when launching the latest wave of government capital spending. Instead, more public sector spending creates a vicious circle, where a “failure” of business investment to respond to higher public sector spending justifies the perceived need to further boost public sector investment “to fill the gap.
This is what has happed with energy subsidies. With biofuel, not only have there been subsidies for years, but the Renewable Fuel Standard mandates that Americans use billions of gallons of biofuel a year. If subsidies for mandates “kick-started” more business investment there would be no need at this point for the military to pay $150 per gallon for some exotic jet fuel.
Lastly, there is the potential for alternative fuel to reduce greenhouse gas emissions. But the evidence is not strong and is decreasing. The latest study from the University of Nebraska-Lincoln found that:
Using corn crop residue to make ethanol and other biofuels reduces soil carbon and can generate more greenhouse gases than gasoline, according to a study published today in the journal Nature Climate Change.
The findings by a University of Nebraska-Lincoln team of researchers cast doubt on whether corn residue can be used to meet federal mandates to ramp up ethanol production and reduce greenhouse gas emissions.
The justification the administration and the military give for spending massive amounts of money on alternative fuels do not hold water. It appears, therefore, that this spending is just one more example of unnecessary and economically harmful subsidies for alternative fuels.
IER Director of Regulatory and State Affairs Daniel Simmons authored this post
RFS is Unsustainable and Harmful to the Economy
Late last year, the Obama administration exercised some common sense and issued a proposed rule to reduce the amount of renewable fuel required under the Renewable Fuel Standard (RFS) from 18.15 billion gallons to 15.21 billion gallons. EPA realized that Americans weren’t using enough fuel to blend 18.15 billion gallons of biofuel without the mandated biofuel exceeding 10 percent of the content to fuels. The 10 percent barrier matters because higher amounts of ethanol can damage engines, especially small engines. EPA’s proposed rule still has problems, but at least it was a nod toward reality.
The RFS is a biofuel mandate. It requires the use of more biofuel than the market would support. As a result, it is economically harmful and results in higher fuel prices and higher food prices (after all nearly half of the U.S. corn crop now goes to making ethanol for fuel instead of being used as food).
The biofuel industry has been built on the promise from the government that the American consumer will be forced to buy ever-increasing amounts of ethanol and biofuel. With Americans not using as much gasoline and diesel as planned, the biofuel producers are being forced to cut back:
A new study from the National Biodiesel Board, shows that the lack of certainty of federal policies is already hurting farmers and producers that help our country become more energy independent. According to the findings, nearly 80 percent of U.S. biodiesel producers have scaled back production this year and almost 6 in 10 have idled production altogether. Additionally, two-thirds of producers said they have already reduced or anticipate reducing their workforce as a result of the downturn.
The biofuel industry is reaping what they have sown. This is the foreseeable result of an industry built on forcing people to use their products. If the government policies change (of even if there is threat to change them), the industry built on the government promises will be harmed.
If the biofuel industry and their supporters were truly concerned about jobs and the economy as a whole, they would reject the RFS. The RFS artificially drives up costs in the rest of the economy, harming the economy as a whole. This comment from Tom Stacy explains why:
“Jobs within in any energy sector are “good” to the extent they support families and individuals, but the number of jobs inside any energy industry sector pale in comparison to the job creation and retention potential of least-cost plentiful, reliable energy availability to the economy at large. While the job and standard of living increases across the economy are hard to trace discretely to low energy costs, the effect is impressive and should not be ignored. May 14th, 2014 House committee testimonies supporting Amended Substitute Senate Bill 312 from Alcoa’s David Ciarlone and Timken’s Peggy Claytor are excellent examples of the leverage energy cost has on jobs across the state’s economy. Low energy costs are a competitive tool for manufacturers. The more energy intensive the manufacturing, the greater the effect. From there, warehousing, shipping and retailing all have significant energy costs borne by consumers. Keeping energy costs as low as possible fights inflation – in ways far beyond household utility bills and pain at the pump.
Energy technologies which are highly subsidized are almost always low value “economic losers” which end up raising the cost of energy despite the handouts they receive at taxpayer expense. When an energy technology group, such as the American Wind Energy Association, touts the jobs they create in their tiny piece of the economy, we must recognize that their industry is actually costing far more jobs across the entire economy. Yet such “trade associations” persist in their relentless public relations and lobbying efforts, largely funded by our tax dollars – and to perpetuate access to our tax dollars. Isn’t that the way a Ponzi scheme works?
Governments are coming to recognize that taxpayers are waking up, and do not wish their hard earned tax dollars to fund special interest industries when the end result is higher energy cost for everyone.”
This is exactly right. Even EPA is waking up that the RFS is unsustainable and harmful to America. Hopefully the proponents of the RFS will see that as well.
IER Director of Regulatory and State Affairs Daniel Simmons authored this post
Where Does Senator Udall Stand?
WASHINGTON – The American Energy Alliance continued its energy policy accountability efforts today with a television ad urging Senator Mark Udall to reverse his stance against the Keystone XL pipeline. Sen. Udall has now voted against the construction of the pipeline multiple times. The ad buy is for $405,450 and will run until May 23rd in Denver and Colorado Springs. AEA President Thomas Pyle released the following statement:
“Senator Udall’s refusal to support Keystone XL is far outside the mainstream. The approval of this commonsense infrastructure project is five years overdue, delaying thousands of jobs and straining our relationship with Canada, America’s strongest energy ally. Coloradans recognize this, which is why two-thirds of them support the pipeline. Despite this overwhelming support from his constituents, Senator Udall remains beholden to a narrow band of special interests in opposition to this commonsense, job-creating, shovel ready project.
“Will Senator Udall continue to stand with special interests that promote an anti-energy agenda, or will he support policies that better the lives of Coloradans and the American people by supporting the Keystone pipeline?”
To watch the ad, click here.
To read the fact sheet for the ad, click here.
###
Pyle Urges Senate to Cut Red Tape on Energy Development
WASHINGTON — American Energy Alliance President Thomas Pyle sent a letter today to Sens. Harry Reid and Mitch McConnell urging them to use the debate over the Shaheen-Portman bill to discuss policies that would cut red tape on American energy development. The letter reads:
The Shaheen-Portman bill will not grow the economy nor will it reduce energy prices for American families. At best, it will increase the government’s micromanagement of our daily lives, something Americans are growing increasingly concerned about. If the Senate intends to debate the Shaheen-Portman bill, it is imperative that there be a thorough discussion of policies to end the red tape that is shackling energy development in America. Here are some important issues that should be part of any discussion of an energy bill:
- Electricity Security and Affordability Act. EPA’s GHG regulations will drive up electricity prices and according to EPA itself will not affect climate change in any meaningful way. Congress must step in to stop these regulations that provide no gain, but will further imperil our struggling economy.
- American Energy Renaissance Act. Oil production increased by an impressive 61 percent on private lands between 2009 and 2013, but oil production fell on federal lands over the same time period. Federal lands contain the largest known energy reserves in the world, but the federal government keeps these resources off limits. The AERA will allow for the development of some of these resources and rein in the red tape that is strangling our economy.
- Encourage the exports of LNG to ensure that production of natural gas in the United States will remain strong, which will, in turn, keep prices low for American consumers.
- Allow the Keystone XL pipeline to be built. Getting more oil from Canada is in the national interest. It is that simple. It should not take five years to figure out if transporting oil from Canada in the most environmentally sensitive and economic way possible is a good thing. We cannot sit by and let the Obama administration continue to play politics when we could be getting people back to work.
To read the full letter, click here.
