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Cooler Heads Digest

Cooler Heads Digest

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Cooler Heads Digest

Issue #2

1. The Week in Global Warming News 2. CEI's Insider Information 3. Issue of the Week4. Action Item5. Cooler Heads Digest Calls for Content

1. The Week in Global Warming News

President Bush unveils U.S. strategy to fight global warming:

G8 Summit in Germany to address global warming:

Science

On the Lighter Side of Things:

2. CEI's Insider Information

Inside the Beltway

CEI's Myron Ebell's take on global warming policy in the nation's capitol:

Senate to consider legislation to raise gas, food, auto, appliance, and electricity prices:

Senate Majority Leader Harry Reid plans to bring an omnibus energy bill to the Senate floor after the Senate finishes debate on the immigration bill. This is likely to happen by the middle or end of next week. S. 1419 was put together by Reid from other bills that have been marked up in committee or introduced. The result should be titled the Making Energy Less Affordable Act, but truth in labeling is not required in the Congress. The various sections of the bill will raise gasoline and food prices, auto prices, appliance, consumer electronic, and industrial prices, and electricity prices. The text of S. 1419 can be found here.

Title 1: Alternative fuel mandate for vehicles. Increases the current ethanol mandate of 7.5 billion gallons to 36 billion gallons per year by 2022, but does not repeal the 51 cents per gallon federal subsidy. The first 15 billion could come entirely from corn, but the remaining 21 billion gallons would have to come from miracle fuels (that is, advanced biofuels, which are defined as produced from anything other than corn kernels). This would raise gasoline prices considerably and also food prices. The current 7.5 billion gallon ethanol mandate is already raising food prices. The rising cost of corn tortillas, which provide the bulk of calories for most Mexicans, has already led to protest demonstrations in Mexico. On the other hand, it won't do much to reduce greenhouse gas emissions, which is why most environmental pressure groups are supporting the even crazier Boxer-Sanders bill. See the previous issue of the Digest for an in-depth look at ethanol or go to www.factsaboutethanol.org .

Title 2: Higher efficiency standards. Many things such as washing machines and air conditioners are already required to meet federal efficiency standards. Many of these standards have already reached the point where the higher costs of the appliance outweigh the benefits of electricity saved. This title would broaden and deepen federal control of consumer choices. It would also raise prices. Consumer Reports recently studied washing machines that meet the new 2007 efficiency standards and found that unless you can pay over $1000 for a washing machine you can no longer buy one that will get your clothes clean in just one wash. This title would apply that approach to just about everything from light bulbs to industrial boilers.

Title 5: Higher Corporate Average Fuel Economy Standards. The mandated targets are beyond anything the auto industry can achieve through the normal rate of technological advances. The result would be higher vehicle prices and smaller and less safe vehicles. For further information, see Sam Kazman's in-depth look at CAFE in this issue.

Title 6: Anti-price gouging on gasoline prices. Every time the price of gasoline goes up, grandstanding members of Congress call for an investigation of possible price gouging by the Federal Trade Commission. The result is always the same: no price gouging found. Now, if this bill is enacted, they won't have to worry about the facts—“unconscionably excessive” prices will be subject to fines ranging from $500,000 to $5,000,000 per day and criminal penalties of no more than five years in prison. This should convince gas station owners in times of declared energy emergencies to avoid prison time by simply stopping selling any gasoline.

Senator Jeff Bingaman (D-NM) plans to offer an amendment on the Senate floor to require that utilities produce 15% of their electricity from renewable sources. Some States already have Renewable Portfolio Standards. These States, mostly in the Northeast and on the West Coast, on average have much higher electricity prices than the Mid-American States that rely mostly on coal-fired power plants. This provision would force up electricity rates dramatically in America's industrial heartland and thereby also push many industrial jobs overseas.

If you want to pay more for energy, you should love S. 1419.

In the States

Daniel Simmons, Director of the Natural Resources Task Force at the American Legislative Exchange Council, tells us what's going on in state capitols:

Many state legislatures have adjourned for the year, but California is still in session and trying to centrally plan its way to environmental improvements. AB 114, for example, requires the Energy Commission to develop a program to capture carbon dioxide emissions as part of industrial processes, AB 118 subsidizes spending on alternative and low-carbon fuel, and AB 236 requires state and local government vehicles in California to be the most energy efficient in their respective classes and to examine “life cycle factors.” But “ Dust to Dust ”, a study by CNW Research, argues that even the “life cycle factors” of a Hummer are more energy efficient than the “green” car of choice, the Toyota Prius, because the Prius's high-tech batteries consume much more energy to manufacture and recycle than the Hummer's simple components. Also, one interesting new trend in legislation at the state level is the banning of incandescent light bulbs, which both California AB 772 and Connecticut SB 1432 do.

Around the World

CEI Senior Fellow Iain Murray examines the state of global warming policy outside the U.S.:

President Bush's announcement of a new climate strategy in advance of the G8 meeting was actually a careful rephrasing of existing policy. He called for the G8 countries plus the major developing world emitters to meet to agree voluntary targets for emissions, not caps, and to pursue their own methods for meeting those targets. It immediately attracted support from Japan, Canada, India and China, which went further to say that the German proposal that seeks to limit temperature increase to 2 degrees Celsius had no scientific basis. The support amounts to a de facto repudiation of the Kyoto method of mandatory caps. It seems that the world is dividing into two camps on action on global warming – and American-led bloc of vibrant economies and an EU-centered bloc that enjoys the support of Brazil, whose economy is already partly powered by domestic ethanol production. Russia currently appears to be in neither camp, although it stands to gain billions either way - by the increased sale of natural gas to Europe if the EU economies are free to grow and by the increased sale of carbon credits to Europe if the cap and trade approach is adopted. In any event, it is clear that America is not isolated and it is unlikely that the G8 summit will reach any substantive accord.

3. Issue of the Week: CAFE

[Last week, we discussed the unintended consequences of ethanol mandates, which are a part of the omnibus energy bill the Senate will soon discuss (see CEI scholar Myron Ebell's Inside the Beltway, this issue). This week, we discuss another component of the omnibus bill, CAFE standards. Below, CEI General Counsel Sam Kazman explains why CAFE regulations are bad for both your wallet, and your health.]

CAFE, the federal new-car fuel economy program, is one of this country's worst regulations . It will get even worse if Congress adopts proposals to make CAFE more stringent.

When gas prices are high, consumers do far more to improve fuel economy than any government program can. They shift their driving habits and their car-buying patterns; in fact, the latter is the very reason that several major carmakers are now experiencing economic difficulty. Moreover, unlike CAFE, this consumer response is based on flexible approaches based on individual circumstances.

CAFE, on the other hand, takes an across-the-board command-and-control approach,and debates over raising it have become a political poker game. “27.5 mpg is too low; let’s raise it to 30.” “I’ll see your 30 and raise it to 35.” “I’ll match your 35 and throw light trucks into the pot as well.” Claims that such increases can be imposed without drastic consequencesare nonsense .

The end result will be enormous hardships, borne ultimately by consumers. We will end up with vehicles that cost more and perform less.

Safety will suffer as well. One of the less publicized findings of the National Research Council’s 2002 CAFE study is that the program, through its downsizing effect on vehicles, already contributes to about 2,000 traffic deaths per year . That toll will only get worse if CAFE is made more stringent.

Advocates of higher CAFE duck this issue by claiming that new technologies eliminate the need for a trade-off between fuel economy and safety. This claim is false. If you take the most high-tech car imaginable and add a hundred pounds to it, two things will happen. Its fuel economy will drop, and its crashworthiness will increase. In short, there will still be a trade-off.

These advocates also claim that consumers will ultimately benefit—new vehicles may cost more under higher CAFE, they admit, but their higher prices will be more than offset by savings at the pump. But if better technologies are available, then we don't need laws to mandate them; consumers will buy them on their own.

Claims such as these have proven false in the past. The June issue of Consumer Reports found that new efficiency standards for washing machines have largely ruined the cleaning ability of affordable toploaders . The politicians and bureaucrats responsible for that fiasco have yet to take responsibility; in fact, Congress is actually considering a bill to raise those very standards even more.

If government efficiency standards can ruin something as simple as a washing machine, imagine the damage they'll inflict on something as complex as a car.

4. Action Item: Do Your Part to Change the Debate!

From Cooler Heads Coalition member, the National Center for Public Policy Research:

We hope you will consider signing the coalition letter below asking the CEO of Caterpillar to withdraw his company from the U.S. Climate Action Partnership (USCAP). USCAP is lobbying for "national legislation to require significant reductions of greenhouse gas emissions" and a cap-and-trade system. USCAP is comprised of various companies and environmental groups, including: the Natural Resources Defense Council, Environmental Defense, the National Wildlife Federation and The Nature Conservancy.

If you wish to sign on, please email your name, title and organization to pknight@nationalcenter.org . If you prefer fax, the number is: 202-543-5975. If you have any questions, please call 202-543-4110.

Feel free to help by circulating this letter to others who might be interested in signing.

--Peyton Knight

Mr. James W. OwensChief Executive OfficerCaterpillar, Inc. 100 North East Adams StreetPeoria , IL 61629

Dear Mr. Owens,

You recently acknowledged that excessive regulations harm Caterpillar's bottom line, noting in your 2006 Annual Report to Stakeholders that Caterpillar¹s on-highway truck engine business would drop significantly in 2007 due to new emissions regulations. That's why we were astonished to see that Caterpillar had joined the United States Climate Action Partnership (USCAP), which seeks to establish a cap and trade system for carbon emissions. If such a system is established, many of the industries upon which Caterpillar depends would be harmed.

As you may know, the Congressional Budget Office reported in April that the oil, gas and coal industries upon which Caterpillar depends for sales ­ would be particularly hard hit by the establishment of a cap-and-trade system. For example, a cap designed to reduce emissions by 23% would result in a 54% devaluation of coal stock value and a 40% decline in coal production. Do you think a 40% reduction in coal production is likely to boost or reduce your sales to this industry?

Other Caterpillar customers will be affected, too. How many sales will you be making to farmers if they can make more money from sequestration than from harvesting crops?

Let¹s be clear about the objectives of some of your coalition partners. The Natural Resources Defense Council, National Wildlife Federation, and Environmental Defense have a long history of opposing the very industries that are Caterpillar¹s best customers, often through expensive litigation. Rather than help deliver your loyal customers to the legal sharks of the environmental movement, Caterpillar should help its customers fight the onslaught of unnecessary emissions caps and regulations that would harm them.

We ask that you immediately withdraw from the United States Climate Action Partnership. The undersigned represent a diverse group grassroots property rights organizations, think tanks, taxpayer action groups, farmers, ranchers and miners ­ some of which are current Caterpillar customers.

If Caterpillar can't be loyal to its customers and consumers, perhaps there's no reason to be loyal to Caterpillar.

5. Cooler Heads Digest Calls for Content

Have stories we may want to include in our weekly news roundup? Is your organization working on something other members of the Coalition might be interested in? Let us know by contacting Julie Walsh at jwalsh@cei.org.

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