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Vol. II, No. 7

Cooler Heads Digest

Title

Vol. II, No. 7

Politics

Electricity Deregulation

On March 25 the Clinton Administration announced its Comprehensive Electricity Competition Plan. The plan, according to the Administration will save consumers $20 billion per year or $230 per household, while providing substantial environmental benefits.

The plan includes various environmental provisions that the Administration claims will produce cleaner air and reduce greenhouse gas emissions. Three billion dollars will be provided for the Public Benefits Fund to support conservation and energy efficiency measures, research and development for clean technologies, and deployment of renewable energy technologies. A Renewable Portfolio Standard will require that a minimum of 5.5 percent of electricity produced come from non-hydroelectric, renewable sources, subject to a cost cap. The plan also calls for emission trading authority for nitrous oxide emissions as well as consumer information requirements so that consumers can choose power from cleaner sources. The administration estimates that these measures will reduce greenhouse gas emissions by 25 to 40 million metric tons in 2010 (U.S. Newswire, March 25, 1998).

Strong opposition from Congress prompted the Administration to drop a proposal by the Environmental Protection Agency to include a provision to limit carbon dioxide emissions,

angering environmentalists. But the Administration said the proposal may resurface before the environmental committees of Congress who may be more sympathetic to the Kyoto Protocol.

The EPA is claiming partial victory, however. The plan gives EPA "streamlined authority . . . to cap nitrous oxide emissions – a minor greenhouse gas already regulated by the agency." They hope that this "important precedent" will lead to additional, far-reaching authority, enabling them to put a carbon emissions cap in place by 2008 (The Washington Times, March 27, 1998).

A Free Market Response to Electricity Deregulation

Competitive Enterprise Institute fellow in regulatory studies, Wayne Crews criticized President Clinton’s electricity deregulation plan, saying, "If the Clinton Administration’s ‘Comprehensive Electricity Competition Plan’ is to deregulate electricity, government oversight of the power industry must decrease. That doesn’t happen here."

Crews also argues that proper deregulation would abolish franchise monopolies, which may actually help renewable energies to compete in a more naturally evolving marketplace. "Mandatory access offers no end to regulation. But abolishing [monopolistic] franchises instead will give energy entrepreneurs – large, small, and renewable – the freedom they need to thrive," said Crews (www.cei.org).

Congressional Republicans Aim to Stop Kyoto

In a speech to utility executives at the Edison Electric Institute CEO meeting Rep. James F. Sensenbrenner, Jr. (R-Wisc.) said that the Kyoto Protocol is "fatally flawed." Citing a study by Charles River Associates, Sensenbrenner pointed out that compliance with the treaty would cost the U.S. $230 million and 3 million jobs in 2030.

He also discussed the tradition of withholding international treaties from the Senate. Past presidents have withheld treaties from Senate ratification for long periods of time. The 1949 Genocide Treaty, for example, was not sent to the Senate for ratification until 1989. Sensenbrenner said that the Senate may hold up something that Clinton really wants, such as nuclear disarmament, to force submission of the Kyoto Protocol.

Another fear is that the Clinton Administration may try to implement the protocol using existing authorities under the Clean Air Act. Sensenbrenner foresees a constitutional confrontation in the event of such attempts by the administration.

Sen. Larry Craig (R-Idaho), chairman of the Senate Energy and Natural Resources Committee’s forest subcommittee, hopes to avoid such a confrontation by creating a "brick wall" which would remove all money earmarked for global warming research from the budgets of

the Environmental Protection Agency, the Departments of Agriculture and Energy, and the Army Corps of Engineers (The Electricity Daily, March 30, 1998).

Sensenbrenner also told the executives that educating the American public about the costs of implementing the protocol was key to its defeat. "If we tell the people how much it’s going to cost . . . the American people will be outraged," he said (BNA Daily Environment Report, March 27, 1998).

Also in a dear colleague letter Rep. Sensenbrenner and Rep. John Dingell (D-Mich.), ranking Democrat on the House Commerce Committee called on President Clinton to scrap the Kyoto Protocol in light of the "arrogance" displayed in remarks (reported in our last issue) made by Raul Estrada-Oyuela, chair of the Kyoto conference. Estrada criticized the U.S. Congress suggesting that "perhaps they should get in touch with the rest of the world" (Greenwire, March 23, 1998).

You Be the Judge

The Clinton administration can’t seem to get its story straight with regards to implementation of the Kyoto Protocol. In February, Under Secretary of State Stuart Eizenstat told the U.S. Senate Committee on Foreign Relations that "We have no intention through the back door or anything else, without Senate confirmation, of trying to impose or take any steps to impose what would be binding restrictions on our companies, on our industry, on our business, on our agriculture, on our commerce, or on our country, until and unless, the Senate of the United States says so."

In December 1997 Vice President Al Gore said, "Whether there is an agreement in Kyoto or not, the United States is prepared, under President Clinton’s leadership, to unilaterally take steps that we believe should be taken in order to deal with this problem."

And on March 31, 1998 President Bill Clinton said at a roundtable in Botswana that the U.S. is "implementing an aggressive plan to reduce" greenhouse gas emissions (Agence France Press, March 31, 1998). Who is telling the truth? You be the judge.

Economics

It All Depends on the Assumptions

The Clinton Administration’s estimates of the costs of complying with the Kyoto Protocol are based on some implausible assumptions, write Raymond J. Kopp and J.W. Anderson of Resources for the Future (Weathervane, March 12, 1998, http://www.weathervane.rff.org/).

Janet Yellen, chair of the Council of Economic Advisors, testified before the House Commerce Committee on March 4, 1998 that the costs of emissions reductions would range from $14 to

$23 per ton of carbon equivalent. This would lead to a mere $70 to $110 increase in energy costs per household over the next ten years.

The Administration’s estimates were based in part on the Second Generation Model (SGM) of Battelle Laboratories which, according to Yellen "is one of the best positioned [models] to analyze the role of international trade in permits." This is important because the Administration’s numbers rely heavily on the assumption that the U.S. will be able to trade emissions with developing countries.

As reported in our last issue, however, Raul Estrada-Oyuela, head of the United Nations commission that negotiated the Kyoto Protocol, stated that emission trading may be phased out after eight years which would significantly alter the Administration’s estimates.

The SGM estimates that in the absence of trading it will cost the U.S. $108 per ton of carbon to meet the Kyoto commitments. Trading between developed countries alone would reduce the costs of compliance to $72 per ton and trading amongst all countries would lower the cost to $26 per ton. Under the last scenario (which is about the same as Yellen’s upper bound estimates) only 15 percent of U.S. emissions reductions would occur within the country. The remaining reductions would occur abroad.

Developing countries, according to Kopp and Anderson, "fear that the rich countries will use their financial power to buy their way out of emissions limits, while limits grow tighter on the poor." They also argue that "It is also not clear that the U.S. Congress will support a system that envisions large outflows of investment capital to the poor countries for emissions permits. Some influential congressmen have already begun to refer to emissions trading as foreign aid.

Other assumptions made by the Administration include: enough "opportunities for cheap emissions reductions . . . in the developing world" to meet European, Japanese and American demand for emission permits and a perfectly efficient trading system.

 

Science

Supertrees

Scientists at Japan’s Toyota Motor Corp. have reported that through genetic engineering they enhance the ability of trees to absorb vehicle emissions. It takes 20 regular trees to absorb the annual emissions of one car, but Toyota’s scientists say they can improve this performance by 30 percent. They have already created trees that absorb nitrous oxides by doubling the number of chromosomes in experimental trees widening air inlets on stems and leaves.

Some environmentalists, however, are not pleased. "If we want to reduce [nitrous oxide], we should reduce our automobile production and set lower emission standards," says Yuichi Sato, deputy director of research at Japan’s Forestry Agency (Business Week, March 30, 1998).

CO2 Eating Algae

Yoshihisa Nakano, a professor of nutrition chemistry at Osaka Prefecture University says that manmade carbon dioxide could be used to breed a single-cell algae called euglena. Euglena, which is used to feed cultivated fish, increases survival ratios among stocks. Nakano also believes that the algae could be used to feed domestic livestock and maybe even humans.

Nakano discovered that the algae reproduces most rapidly in air containing 15-20 percent carbon dioxide and his studies indicate that one-hectare tank of the cultivated algae would absorb about 410 tons of carbon dioxide (The Daily Yomiuri, March 31, 1998).

Etc.

A recent article in The Detroit News about taxing sports utility vehicles (SUVs) spawned several angry responses. Randall J. Gillary of Troy, Michigan wrote, "My wife is currently driving her second GMC Suburban, and the most off-road use our vehicle has ever seen is an occasional dirt driveway. We have four kids,

and our Suburban is the safest, the most comfortable and the most pleasurable vehicle we have ever had for transporting them. I will not cram my family into a Yugo in order to please the environmental lobby."

Another gentlemen, Chuck Munchbach of Alden sarcastically wrote, "Just because I live in northern Michigan, with all the snow and other inclement weather, and just because my family is safer in that big, gas-guzzling, earth-hating pickup is no excuse. I should not be allowed to buy this vehicle."

Finally, Lou Ghilardi of Milford argues, "The Corporate Average Fuel Economy law . . . is the primary cause of any safety disparity between small cars and large trucks. But for this law, fewer small cars would be sold and those that would be sold would be larger, heavier and safer.

"It is nonsensical that this flawed legislation, enacted following the oil crises in the 1970s, remains in effect in the 1990s when, due to technological advancements, oil supplies are abundant and real gasoline prices are the lowest they’ve been in decades" (March 30, 1998).

 

Announcements

The Competitive Enterprise Institute has produced a book and a highlights video based on The Costs of Kyoto conference held in July 1997. Both the book and the video are available for $15 or buy both for $25. To order call CEI at (202) 331-1010, or e-mail to info@cei.org.

Thomas Gale Moore, a member of the Competitive Enterprise Institute’s board of directors, has written a book, Climate of Fear: Why We Shouldn't Worry about Global Warming that will soon be published by Cato Institute. Ordering details will be forthcoming at Cato’s website at www.cato.org

The Institute of Economic Affairs in London has published a book, Climate Change: Challenging the Conventional Wisdom. The book can be ordered by contacting IEA by e-mail at books@iea.org.uk.

The European Science and Environment Forum (ESEF) has recently published Global Warming: The Continuing Debate. It can be ordered for $25 from CEI or by contacting ESEF at lorraine@esef.org.