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In the Pipeline: 11/5/12

November 5, 2012 by Leave a Comment

18th in the Economic Freedom of the World Report? If this ship were still sailing, we would be going in the wrong direction. But apparently we’re just sinking now. Washington Times (11/4/12) reports: “In a new policy study for the Institute for Energy Research, we warn policymakers about this new form of regulatory analysis, which is driven by both ideology and a flawed behavioral approach to economics. America, which recently slipped to 18th in the Economic Freedom of the World Report, previously enjoyed high economic freedom scores due to keeping regulation at a somewhat sensible level. Some environmental regulations make sense and have obvious direct benefits which economists can quantify, but most EPA regulations today impede economic progress and are justified by dubious spillover benefits.”

 

The EPA is burning the midnight oil to kill coal. Washington Examiner(11/4/12) reports: “President Obama’s Environmental Protection Agency has devoted an unprecedented number of bureaucrats to finalizing new anti-coal regulations that are set to be released at the end of November, according to a source inside the EPA.”

 

Well now . . . Chicago Tribune (11/1/12) reports: “The United States needs to reconsider its rules on exporting natural gas – even to countries with which it has free trade agreements – now that a surge in drilling has made the nation one of the world’s fastest-growing producers, U.S. Senator Ron Wyden said on Thursday.”

 

We missed this last week.  But fortunately, enforcement at FERC this week is still misguided and colored by political agendas.NYTimes (11/1/12) reports: “Wall Street finds itself in a bare-knuckle brawl with a government agency… Yet the fight is not with the Federal Reserve or another banking regulator, but a less-known agency more accustomed to patrolling the nation’s energy pipeline than a trading floor… The Federal Energy Regulatory Commission, the government watchdog overseeing the oil, natural gas and electricity business, has lately taken aim at three major banks suspected of manipulating energy prices.”

 

Do you remember all the way back to last week when we suggested that people aren’t willing to pay for Bolshevik schemes to “address” climate change? Apparently, the crew at the Huffington Post does, and it turns out that not even their readers are willing to pay. Huffington Post (11/2/12) reports: “Only one in five Americans would be willing to pay significantly more for gas or electricity, even if they were assured that it meant solving the climate change crisis, according to a HuffPost/YouGov poll conducted this week.”

 

We ran a related article last week, but discovered over the weekend that many otherwise bright people have limited anxiety about a carbon tax or any cognate (like this).  That’s not good because Treasury, environmentalists, and likely Romney appointees like Greg Mankiw and Glenn Hubbard are in favor of this sort of thing.  It is very bad mojo. Fox News (11/1/12) reports: “A major tax study currently being sponsored by the U.S. Treasury will give environmental activists a powerful new weapon in their campaign to alter the entire American economic and social landscape in the name of halting “climate change”—including the possible levying of new carbon taxes.”

 

New York City was unprepared for a weather event that its own staff had foreseen.  Maybe if El Bloombito had spent more time worrying about that, and less time worrying about the size of soda or when to endorse Obama, fewer of his fellow New Yorkers would be dead. PowerLine (11/4/12) reports: “What is [Bloomberg] going to do about the fact that his city was less prepared than it should have been for a disaster that was expected and one of a sort will certainly recur, climate change or not?”

 

Some more fun facts on Sandy, hurricanes, and the usual persiflage. GlobalWarming.org (11/2/12) reports: “With respect to hurricane damages, the chief and as yet only discernible difference between recent and earlier decades is that ”There are more people and more wealth in harm’s way.” So there is an ‘anthropogenic’ component, but not the sort about which warmists complain. “Partly this [increase in damages] is due to local land-use policies, partly to incentives such as government-subsidized insurance, but mostly to the simple fact that people like being on the coast and near rivers,” Pielke, Jr. explains.”

 

Alas, the unintended consequences of bad government policy rear its ugly head. American Bird Conservancy (10/17/12) reports: “A coalition of eight conservation organizations has called on the U.S. Fish and Wildlife Service (FWS) to make changes at a wind energy facility in Western Maryland to reduce bird and bat mortality.”

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In the Pipeline: 11/2/12

November 2, 2012 by Leave a Comment

We missed this earlier in the week.  But the hypocrisy is so excruciatingly brilliant that we had to share it.  For those who have not been watching, these two Senators are leading the charge to extend the wind production tax credit. Washington Times(10/31/12) reports: “Each job created with federal stimulus cash through the Obama administration’s advanced battery manufacturing program cost more than $158,000 and many of them likely were temporary, according to an analysis released Wednesday by two senior Republicans… Sens. Chuck Grassley of Iowa and John Thune of South Dakota, members of the Senate Finance Committee, cited figures they obtained after pressing for verification of administration claims of the economic benefits of the $2 billion program funded under the stimulus bill.”

 

Todd Wynn is a stone cold killer.  And his hair is awesome. Master Resource (11/1/12) reports: “These mandates are all regressive. When the cost of electricity rises, low income households shoulder a greater burden than higher income households as the energy costs make up a larger portion of their budget. This is especially true for low income households that are on fixed income such as social security or retirement since their income most likely does not keep pace with higher costs of living.”

 

Another dog bites man story. American Clean Skies Foundation (October 2012) reports: “This new ACSF report shows that shale gas and tight oil production will add $167 billion to $245 billion to the U.S. gross domestic product by 2017, and that will deliver 835,000 to 1.6 million new jobs. This is only one of the many ways technological innovations in natural gas and tight oil production are transforming the U.S. economy.”

 

The Great Oz has spoken! Pay no attention to that man behind the curtain. The Hill (11/1/12) reports: “The scientific enterprise at the Environmental Protection Agency (EPA) is broken, contrary to EPA Administrator Lisa Jackson’s assertions that “science is the backbone of everything we do at EPA,” or that major regulations are based on the recommendations of EPA’s “independent” science advisors. As Americans face a fragile economy and skyrocketing energy prices fueled by President Obama’s agenda, it is important to pull back the curtain on the ideologically-driven processes EPA is using to justify an avalanche of costly rules.”

 

To remain green, we obviously need more lead-acid batteries all around.  Or maybe more nickel-cadmium batteries. Bloomberg(10/31/12) reports: “Some of the roughly 6 million power customers in the Northeast without electricity in Hurricane Sandy’s wake may be glancing around at a handful of homes with solar panels on their rooftops, thinking their clean-powered neighbors might have juice. Most of the time, that’s not the case.”

 

Shouldn’t they have asked for more wind turbines or charging stations or cellulosic ethanol?  I mean, I’m pretty sure these people keep telling us that gasoline is the fuel of the past or some such nonsense. Senators Lautenberg and Mendez (11/1/12) report: “We are learning from our county offices of emergency management (OEMs) that there are critical shortages of gasoline and diesel fuel. They have told us they are running out of these resources to run their emergency vehicles and critical infrastructure, such as sewage waste water treatment, and drinking water and sanitation facilities.”

 

Fewer droughts, fewer hurricanes.  Good news for the rest of us, but bad news for the climate vultures. WSJ (10/31/12) reports: “Sandy was terrible, but we’re currently in a relative hurricane ‘drought.’ Connecting energy policy and disasters makes little scientific sense but that doesn’t stop the nation’s top scientists, Waxman-Markey-Bloomberg from doing it.”

 

So, apparently, they aren’t any better as boats than they are as cars. Jalopnik (10/30/12) reports: “Approximately 16 of the $100,000+ Fisker Karma extended-range luxury hybrids were parked in Port Newark, New Jersey last night when water from Hurricane Sandy’s storm surge apparently breached the port and submerged the vehicles. As Jalopnik has exclusively learned, the cars then caught fire and burned to the ground.”

 

We are informally keeping track of which think tank chiefs are opposed to a carbon tax.  The list to date follows.  If your guy is not on the list, it is because he either favors a carbon tax, wants to retain the option of favoring a carbon tax at some point in the future, or has yet to contact us. 

Tom Pyle, American Energy Alliance / Institute for Energy Research
Myron Ebell, Freedom Action
Phil Kerpen, American Committment
Fred Smith, Competitive Enterprise Institute
Andrew Quinlan, Center for Freedom and Prosperity
Tim Phillips, Americans for Prosperity
Joe Bast, Heartland Institute
David Ridenour, National Center for Public Policy Research
Michael Needham, Heritage Action for America

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LABOR REPORT: U.S. LOSES MORE MINING JOBS

November 2, 2012 by Leave a Comment

 

WASHINGTON D.C. — American Energy Alliance President Thomas Pyle released the following statement concerning today’s jobs report by the Bureau of Labor Statistics:

“Today’s employment report underscores the need for new, pro-growth policies for the energy and manufacturing sectors.  Mining lost 9,000 jobs in October, and this vital industry has shed 17,000 jobs since May. Manufacturing jobs were flat again this month, and the Bureau of Labor Statistics reports that this sector has shown little change since April. Average earnings fell again, yet energy prices continue to climb. The American people have endured more than four years of economic hardship, yet Washington regulators have continued their assault on affordable energy and the jobs that developing our domestic resources could provide, particularly on federal lands. We cannot experience lasting economic recovery or create the jobs that will drive our energy future with the status quo.”

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AEA Study: Removing Big Wind’s ‘Training Wheels’

October 31, 2012 by 6 Comments

New Study Finds Federal Wind Production Tax Credit (PTC) No Longer Needed to Drive Wind Generation Development
Mature Wind Industry Can Compete On Its Own; Taxpayer-funded Welfare-For-Wind Must End

WASHINGTON D.C. – A new report released today by the American Energy Alliance (AEA) concludes that wind energy is a mature industry whose growth has rendered the federal wind Production Tax Credit (PTC) an obsolete government hand-out that should be allowed to expire.

The AEA-commissioned study, “Removing Big Wind’s Training Wheels: The Case for Ending the Federal Production Tax Credit,” documents the explosive growth of wind generation as well as the favorable outlook for future wind generation development as a result of Renewable Portfolio Standards (RPS) – not the PTC. Conducted by David Dismukes, associate director and professor at the Louisiana State University Center for Energy Studies, the study finds that wind generation now comprises 50,000 megawatts (MW) of electricity capacity in the United States — a five-fold increase since 2006 — and will continue to grow even without the renewal of the PTC.  The PTC therefore only serves to tip the scale in favor of a well-established industry, giving wind an politically-determined advantage over other types of generation.

Background

The PTC was first enacted in 1992 and currently provides wind producers a subsidy of $22 per megawatt-hour (MWh) of energy generated.  It has been extended seven times and is scheduled to expire under current law on December 31, 2012.  Congress is now debating another extension of the credit.  The Joint Committee on Taxation estimates that a one-year extension would cost taxpayers $12.1 billion.

“When you strip away all the rhetoric, the real issue is that wind is a mature industry whose growth is being fueled by aggressive RPS standards and is no longer in need of training wheels,” said Dr. Dismukes. “The PTC is a costly and inefficient subsidy that is clearly no longer necessary.”

“The government needs to stop caving to powerful wind lobbyists and establishing policies that pick winners and losers in the energy marketplace. The wind PTC has run its course, and taxpayers must no longer be forced to subsidize a well-established wind industry that offers no substantive proposal for a phase-out of decades-old energy welfare,” said AEA President Thomas Pyle.

Findings

The Dismukes study finds that widespread adoption of state RPS mandates established a substantial guaranteed market for wind; one that did not exist when the PTC was enacted in 1992.  Although a few states adopted RPS policies as early as the mid to late 1990s, most states enacted them between 2004 and 2007, which is when a substantial increase in wind energy capacity development occurred, as documented in the report. To date, wind generation accounts for 90% of all new renewable resources developed under these non-federal programs.

Additionally, RPS requirements are expected to grow from about 50,000 MW in 2010 to almost 200,000 MW by 2030, according to the report.  If wind maintains the same 90% market share it holds in today’s renewable energy generation mix, merely fulfilling future RPS requirements guarantees wind producers a market for almost 130 GW of additional capacity through 2030.  As such, even post-federal PTC expiration, the outlook for future wind generation development continues to be exceptionally favorable.

The report also highlights forecasts from the U.S. Energy Information Administration which find that even if the PTC and other incentives are eliminated, renewable generation will still be on track to rise from 500 billion kilowatt hours in 2011 to approximately 750 billion kilowatt hours by 2035, amounting to a 50% increase in wind generation.

Additional key findings include:

  • Standards & Poor’s recently estimated as much as $150 billion in new renewable energy investment opportunities over the next 10 years even if the PTC is not renewed, driven in large part by opportunities in wind energy development.  Thus, offering billions of dollars in federal tax subsidies to wind generation, in addition to mandated state renewable subsidies, allows wind generators to “double dip,” and reflects a gross waste of limited fiscal resources.
  • Over 50% of wind capacity is located in only five states; over 75% is located in just 11 states. The federal PTC, however, unfairly shifts wind energy development costs from taxpayers in the RPS states to those with little or no wind development, forcing taxpayers across the country to support an industry concentrated in only a few states.  In fact, under the PTC, taxpayers in the states without RPS mandates pay approximately 24% of the PTC funding, even though they receive no direct benefit.
  • The “one-size-fits-all” PTC is an inefficient and expensive means of supporting wind generation that fails to recognize the industry’s heterogeneity and operational differences, and grossly wastes limited fiscal resources by over-subsidizing many projects and driving over-development.

To download a copy of the full report, click here.

About The American Energy Alliance

Founded in May, 2008, The American Energy Alliance (AEA) is a not-for-profit organization that engages in grassroots public policy advocacy and debate concerning energy and environmental policies. AEA believes that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society. AEA believes that government policies should be predictable, simple and technology neutral.

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In the Pipeline: 10/31/12

October 31, 2012 by Leave a Comment

You know what?  The AEA Nation thinks Heather Wilson gets it, too.  Folks, you must read this letter.  And if you are lucky enough to live in New Mexico, you get to choose between two very distinct visions for the direction of our nation.  That’s kind of cool. New Mexico Watch Dog (10/29/12) reports: “The Navajo Nation Council has declared its support for Heather Wilson for U.S. Senate.  An October 17, 2012, letter signed by Johnny Naize, the Speaker of the Navajo Nation Council, while not explicitly calling upon tribal members to vote for Wilson, sends a clear message that the leaders of the largest Native American tribe in the country support her over Democratic opponent, Rep. Martin Heinrich.  They left nothing to guess when they wrote to Wilson, “Our Nation and our Navajo people are in dire need of leaders such as you who can advocate for sensible solutions and sustainable economic development.””

 

 

You had to figure it was not going to take long for the vultures to descend and try to turn human tragedy into political gain. Politico(10/30/12) reports: “Environmental activist Bill McKibben says Sandy should be a “wake-up call” to elected officials about the effects of climate change… “This is an absolutely unprecedented storm,” he said Monday evening. And it comes during the warmest year in recorded history in the United States — dating back to the late 19th century — and one in which many areas were affected by a serious drought.”

 

We kind of dig this. GlobalWarming.org (10/29/12) reports: “In Wind Intermittency and the Production Tax Credit: A High Cost Subsidy for Low Value Power, economist Jonathan Lesser finds that “the vast majority of the Nation’s wind resources fail to produce any electricity when our customers need it most.””

 

We are moving to Denmark. Renewable Energy World (10/29/12) reports: “The Danish government won’t provide direct support to Vestas Wind Systems A/S should the world’s biggest maker of wind turbines need a bailout to stay afloat… Aarhus, Denmark-based Vestas, which has been hurt by higher-than-budgeted costs to develop its V112 turbine and cuts in green energy subsidies, said in July it agreed with its banks to defer a so-called test of financial covenants, delaying loan payments after losses eroded its cash flow. The government is now saying it won’t step in to bridge any periods of financial distress at the company to prevent it going bankrupt.”

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In the Pipeline: 10/30/12

October 30, 2012 by Leave a Comment

Before you got out of bed this morning, these men stuck their heads between two rocks, 500 feet beneath the surface, to deliver the abundant, affordable, and reliable energy that powers our way of life.  So thank a coal miner when you plunk down five bucks for your grande, skinny, half-caf, soy Frappuccino on your way to the office.

 

 

Last week we commented about this meeting. We intended to let it speak for itself, but AEI went and tried to have it both ways – yet again.  If this is really “an academic meeting” and “not evidence that AEI supports a carbon tax,” then why are there no opponents of a carbon tax on the agenda?  While it is increasingly clear that AEI has jumped the shark, we will not give up.  We are holding a place for Arthur Brooks on our list of think tank heads who are opposed to a carbon tax.  Come home, Arthur, come home. The Hill (10/26/12) reports: “A conservative think tank will host a forum next month on carbon tax proposals — and this time it’s on the record… The American Enterprise Institute is the venue for the Nov. 13 event on the economics of carbon taxes, which AEI is hosting with two other think tanks, the Brookings Institution and Resources for the Future, and the International Monetary Fund.”

 

We told you this would happen back in 1997 when Enron was celebrating the Kyoto Accord. Reuters (10/25/12) reports: “EU talks to agree tactics ahead of an international climate summit in Doha next month ended in disarray on Thursday, after coal-dependent Poland led opposition to more ambitious attempts to curb atmospheric pollution.”

 

Here’s what this article tells us:  neither Glenn Hubbard nor Greg Mankiw should be allowed anywhere near public policy.  And yet, they are going to be two of the most important people in a Romney Administration. Financial Times (10/29/12) reports: “Discussing the size of a carbon tax, rather than alternatives to it, would be a big step forward compared to where the public discussion is right now,” Hubbard wrote. “As judged on purely political terms, higher Pigovian taxes are a wacky idea. I have yet to see a major candidate for President endorse the concept….We can hope that in future elections the gap between the advice of the economic advisers and the advice of the political consultants will become a lot smaller.”

 

Of course the White House exerted pressure on DOE to sign off on these deals.  This whole mania for expensive, unreliable energy was their creation. National Legal and Policy Center (10/29/12) reports: “The claim that the many beneficiaries (like Solyndra and Fisker Automotive) of President Obama’s green energy stimulus program received their millions of taxpayer dollars based on measurable metrics rather than political favoritism has always been undermined by the circumstantial evidence, but documents obtained by Complete Colorado indicate the White House applied direct pressure to its own Department of Energy to reward (another) one of its allies.”

 

We have discussed this before, but it is worth another visit.  The long and short is that the State Department could not find resources or time to save American lives in Libya, but did manage to find time and resources to install charging stations for electric vehicles in Austria.  So at least the parents of the dead can take solace in the idea that diplomats in Vienna can drive around in expensive, unreliable cars. Washington Times (10/10/12) reports: “In a May 3, 2012, email, the State Department denied a request by a group of Special Forces assigned to protect the U.S. embassy in Libya to continue their use of a DC- 3 airplane for security operations throughout the country… The subject line of the email, on which slain Ambassador Chris Stevens was copied, read: “Termination of Tripoli DC-3 Support.”… Four days later, on May 7, the State Department authorized the U.S. embassy in Vienna to purchase a $108,000 electric vehicle charging station for the embassy motor pool’s new Chevrolet Volts.”

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In the Pipeline: 10/29/12

October 29, 2012 by Leave a Comment

What’s holding electric cars back is that they are inferior, expensive products.  How many superior, affordable products need government support? National Journal (10/25/12) reports: “Consider auto sales. Instead of looking at the sales of electric and plug-in hybrid electric vehicles as a percentage of the total auto sales, the focus should be on the incredible growth in sales this year in this sector.”

 

$16 trillion in debt, and the government claims the private sector is recklessly abusing resources.  How do these people sleep at night? IER (10/26/12) reports: “Markey, who is Ranking Member of the House Natural Resources Committee, argues that the “Use it or Lose It” report shows that new energy-rich areas like Alaska should not be opened for drilling, because oil and gas companies already have enough idle leases that are not being utilized.  The report, however, fails to make a key distinction: that some leases are more valuable than others, and that the most valuable areas of the federal land estate all aren’t being offered for lease.  An analysis of the report’s central claims is below.”

 

All these people want to do is control our lives.  Once they have that control, it’s both amusing and frightening to realize they have nothing else on the to-do list. NY Post (10/26/12) reports: “Nationally, environmental activists push the expansion of renewable energy — solar, wind, etc. But when industries work to implement those initiatives at the community level, local greens scream at the impact on their community; they’d rather keep the land as it is.

 

This man should be President. Environment and Public Works (10/26/12) reports: “I am truly honored that yet another radical environmental group has given me an award for my efforts to put a stop to President Obama’s far-left global warming agenda,” Senator Inhofe said.  “The Center for Biological Diversity should be pleased to know that my award will have a prominent place in my office, along with all the others I have been proud to receive over the years.  As the top Republican on the Senate Committee on Environment and Public Works, I have worked every day to expose the radical left’s extremist agenda aimed at ending American production of oil, gas, and coal because of the devastating consequences it will have on the American people.

 

Hmmmm. E&ENews (10/26/12) reports: “But Vitter said in an interview yesterday that, while he’s not trying to get ahead of Election Day, he’s also not comfortable with the idea of Connaughton playing any major environmental or energy role in a Romney administration… “I would have very serious concerns with Jim Connaughton being named to any significant position,” Vitter said. “And if it were a Senate-confirmed position, I would expect to have to oppose his nomination.””

 

But apparently the wind production tax credit is still a really good idea. Energy & Commerce (10/26/12) reports: “Rep. Cory Gardner (R-CO) appeared on Fox News today to discuss the ongoing investigations into Colorado solar panel manufacturer Abound Solar – the now-bankrupt company that was awarded a $400 million loan guarantee from the Department of Energy. Abound Solar, which is located in Gardner’s congressional district, is now under investigation by the Weld County district attorney for financial misrepresentation and consumer fraud. Whistleblowers have come forward and exposed that the company was falsifying documents and failing to disclose product flaws to investors and customers. Describing the problems with Abound’s panels, Gardner quoted a whistleblower employee who stated, “The solar panels worked fine as long as you didn’t put them in the sun.””

 

Actually, Governor Romney was repeating what he has been saying for a while.  Tax credits for mature industries (like wind that has been around for more than 100 years) should be phased out. Energy Guardian (10/16/12) reports: “In what was billed by his campaign as a major economic speech delivered in Ames, Iowa, Romney appeared to back away from his previous stance against tax incentives for the wind industry, which is lobbying to extend the Production Tax Credit. “We will support nuclear and renewables, but phase out subsidies once an industry is on its feet,” Romney said.”

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In the Pipeline: 10/26/12

October 26, 2012 by Leave a Comment

Whether you’re a high school student, a union guy working at the refinery, or a United States Senator, the bus is a symbol of opportunity and a better energy future for us all. 

 

Senator Jim DeMint signs the American Products and Power bus. 

 

Why am I not surprised that EPA does not have a definition of “savings/cost avoidances?” Washington Examiner (10/24/12) reports: “Environmental Protection Agency officials will spend in excess of $8 billion this year, but they will apparently do so without a working definition of “savings/cost avoidances” or a way of calculating if they’ve achieved any,” according to the agency’s Inspector-General.”

 

Freedom. Opportunity. Enterprise. Carbon Taxes. At least now the meetings are out in the open. Let the moral case for the largest, most regressive tax increase in American history begin! AEI (October 2012) reports: “The pros and cons of introducing a carbon tax in the US are the topic of many spirited debates, yet discussion of the consequences from alternative tax designs remains largely confined to academia… In an effort to shed more light on this topic and its budgetary impact, AEI, the Climate and Energy Economics Project at the Brookings Institution, the International Monetary Fund, and Resources for the Future are cohosting a conference to discuss ideas for US carbon tax design and options for the potential use of carbon tax revenues.”

 

I don’t get it.  Why isn’t Sachs headlining AEI’s big coming out of the closet carbon tax festival? The Australian (10/25/12) reports: “But Jeffrey Sachs, a professor at Columbia University and adviser to the United Nations Secretary General on its Millennium Development Goals, says Australia’s implementation of the tax has set a good example for the world… Sachs, Director of Columbia’s Earth Institute, warned on Thursday against calls for the tax to be replaced by a tradable permit system by carbon emitters.”

 

I wonder if GAO is going to think about which industry sectors are net taxpayers and which pay no taxes (net) to the federal government. The Hill (10/25/12) reports: “Waxman is asking congressional auditors to broaden a study requested by Committee Chairman Rep. Fred Upton (R-Mich.), arguing that Upton’s proposal would allow billions of dollars in taxpayer support for oil companies to escape review.”

 

Marlo Lewis is a stone cold killer. Forbes (10/25/12) reports: “The only thing Republicans would gain from destroying their bona fides as the anti-tax, pro-energy party is faint and fleeting praise from cocktail party ‘progressives’ and the liberal media. If Republicans consider that a good bargain, they deserve to be called the stupid party.”

 

We are informally keeping track of which think tank chiefs are opposed to a carbon tax.  The list to date follows.  If your guy is not on the list, it is because he either favors a carbon tax, wants to retain the option of favoring a carbon tax at some point in the future, or has yet to contact us. 

Tom Pyle, American Energy Alliance / Institute for Energy Research
Myron Ebell, Freedom Action
Phil Kerpen, American Commitment
Fred Smith, Competitive Enterprise Institute
Andrew Quinlan, Center for Freedom and Prosperity
Tim Phillips, Americans for Prosperity
Joe Bast, Heartland Institute
David Ridenour, National Center for Public Policy Research
Michael Needham, Heritage Action for America

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McDermott’s Carbon Tax Bill Is Worst of All Possible Worlds

October 24, 2012 by 2 Comments

An August analysis from Capital Alpha explores Rep. Jim McDermott’s carbon tax bill introduced late in the summer. The proposal calls for an initial $25 per ton tax on carbon, which quickly escalates to a capped fine of $525 (!) per ton by the year 2024. The Capital Alpha report is fairly evenhanded and speaks mostly of political trends, rather than endorsing or criticizing the proposal. Yet in so doing, the report fails to point out the numerous ways in which the McDermott bill would be economically devastating.

The Capital Alpha analysts summarize the most obvious harm upfront when they write:

McDermott’s bill establishes a fixed carbon price that escalates rapidly from a minimum of $25 per metric ton…in 2015 to…$525 per ton in 2024. At this price, the carbon tax on a gallon of gasoline would be $5.20…the tax on average residential use of gas-fired electricity for one year would be $1131.90, the tax on heating a home with oil for one winter would be $3262.38, and revenues raised for the federal government in 2024…would be $2.4 trillion.

The man on the street can understand that the above figures are scandalous, but it’s interesting to note that standard economic models of climate change also indicate that McDermott’s proposal is a cure worse than the disease. Indeed, perhaps the world’s expert on the subject—and a strong supporter of a carbon tax—William Nordhaus has argued (as of the 2007 runs of his computer models) that the “optimal” carbon tax should be a mere $53/ton in the year 2025. A carbon tax of $525 represents an incredible overkill—even if we stipulate the “consensus” physical science and mainstream economic modeling of climate change. McDermott’s proposal would cause literally many trillions of dollars of damage to the economy, in excess of the environmental gains that the mainstream scientists discuss. (See Tables 3 and 4 in this paper discussing Nordhaus’ respected model.)

Yet it gets worse. McDermott and even the Capital Alpha analysts are touting the claim that because some of the new carbon tax’s revenue would be used to reduce the corporate income tax, that therefore it won’t “hurt the economy.” This claim is wrong for several reasons.

First, McDermott isn’t going to “recycle” all of the funds—he explicitly calls for 25% of the revenues to be used for “deficit reduction.” Think about what that means. The government is going to take in more money via a carbon tax, and some of it is going to be used to make the deficit smaller than it otherwise would be. Simply put, the government is going to spend 25% of the carbon tax on its various programs. It is a tax hike pure and simple, because the government has been spending more than it takes in through other taxes. Recall that by their own estimate, the Capital Alpha analysts think the government might take in some $2.4 trillion (using a static analysis which doesn’t account for the reduction in driving, home heating, etc. in response to the immense new tax). A quarter of that is $600 billion, just in the year 2024 alone. Even by McDermott’s own promises, that is a net tax increase. This will hardly promote economic growth or ease the burden on corporations.

Second, even of the remaining 75% of the funds, the McDermott plan doesn’t call for them all to be used to reduce other taxes. Instead, they would be sent directly to Americans in order to ease the burden of higher energy prices. Although this sounds equivalent to lowering taxes, it isn’t. The distortions caused by taxes on corporations and individuals go above and beyond the mere dollars extracted. By reducing the incentive to earn income in the first place, a punitive tax code discourages productive activity. By sending a lump-sum check to taxpayers, while keeping the marginal rates on other taxes the same, the supply-side boost to the economy is mitigated even further.

Finally, even if 100% of the carbon tax revenues were devoted dollar-for-dollar to reducing other taxes, the best economic analysis argues that there would be a net drag on the economy. Proponents could argue that the environmental benefits outweighed the loss in conventional economic growth, but McDermott and analysts of his proposal should stop claiming that it is a win-win for the environment and the economy. On the contrary, it is a clear lose for jobs, economic growth, and poorer households who suffer the brunt of higher energy prices.

In conclusion, Jim McDermott’s proposed carbon tax flies in the face of the standard results in the economics of climate change. Even supporters of a carbon tax—at least those familiar with the literature—would have a hard time justifying the incredibly aggressive tax rate in the bill. Technical issues aside, it would be very naïve to take the bill’s proponents seriously when they claim the funds will be used to reduce other taxes, or that the government won’t ramp up its spending because of the new money.

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In the Pipeline: 10/24/12

October 24, 2012 by Leave a Comment

We have been preaching this gospel for some time.  So have the folks at House Energy and Commerce. Energy & Commerce (10/23/12) reports: “Unconventional oil and gas production could support up to 3.5 million jobs by 2035 according to a new study released today by IHS Global Insight. This new study, America’s New Energy Future: The Unconventional Oil and Gas Revolution and the Economy, complements previous IHS research on the economic impacts of unconventional oil and gas production made possible by hydraulic fracturing technology. In addition to its job creation potential, the report finds shale energy production will help boost government revenues, reduce chronic deficits, and help revive American manufacturing.”

 

Their carefully crafted myth of scarcity is about to completely unravel. Podesta, Browner, Gore, Pope, McKibbon, Weiss, Et. al. will certainly blow a gasket when the U.S. overtakes Saudi Arabia in oil production. And we’re not even drilling on federal lands at the moment.  FuelFix (10/23/12) reports: “U.S. oil output is surging so fast that the United States could soon overtake Saudi Arabia as the world’s biggest producer.”

 

Let’s make it simple.  The Obama crew, through regulation, is impairing assets in the coal industry – railroads, mines, power plants.  The utility MACT has lots of costs, and just about no benefits associated with reducing mercury.  So when the President tells you he loves the coal industry, take another look at the record. That is all. USAToday (10/24/12) reports: “Coal advocates say the Obama administration is pursuing costly new regulations on mines and on power plants that burn coal will be a devastating blow to the industry… “If there’s less coal being demanded, especially certain types of coal, that certain jobs are required for, then you are going to reduce” mine employment, said Dan Kish, senior vice president of the Institute for Energy Research.”

 

Think about this when we start talking about coal exports next year. We can either export our products or our people. It is just that simple. WSJ (10/23/12) reports: “Charles Stella has struck blue-collar gold: a mining-industry job in Western Australia… The 31-year-old boilermaker from Pittsburgh is one of the relatively few American workers who have been picked to pluck and process minerals in such remote regions and under such demanding conditions that wages for even driving a truck have climbed north of six figures.”

 

We offer this because it is difficult to keep track of the failures. Green Corruption (10/20/12) reports: “UPDATE: New calculations, October 23, 2012: 23 bankrupt, 27 troubled, equals a new “Obama green-energy failure” list total of 50. At least $15 billion of “green” taxpayer money is either gone or still at risk, and the majority was funneled to Obama and Democrat cronies –– percentage of cronyism is hovering around 60% (29 of the 50), until I have time to dig further.”

 

We missed this last week.  That is okay, because the writer missed the number one reason why people with a brain might oppose a carbon tax – it solves nothing. National Review (10/19/12) reports: “Jim’s arguments persuaded me that a carbon tax is not as attractive an idea as environmentalists tend to think, particularly in light of the compromises that would be involved in practice. Like David, however, I wouldn’t rule out a domestic carbon tax, though not for the reason he offers (i.e., to give a boost to green technology). Rather, I think a small carbon tax could be justified on public health grounds.”

 

Seriously?  We can hardly wait for the depositions to start. Watts Up With That (10/23/12) reports: “Today, the case of Dr. Michael E. Mann vs. The National Review and The Competitive Enterprise Institute was filed in the Superior Court of the District of Columbia. Dr. Mann, a Professor and Director of the Earth System Science Center at Pennsylvania State University, has instituted this lawsuit against the two organizations, along with two of their authors, based upon their false and defamatory statements accusing him of academic fraud and comparing him to a convicted child molester, Jerry Sandusky.”

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