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Vol. VI, No. 21

Cooler Heads Digest

Title

Vol. VI, No. 21

 

Politics

 

Energy Bill Gets New Life

 

As the Congress neared adjournment this week, the energy bill appeared to be dead as House and Senate conferees continued to disagree on major outstanding issues.  The decision today to hold a lame duck session after the November elections means that congressional staffers can continue to try to put together a deal, which could then be voted out and sent to the president in late November or December.

 

As with most conference committees on major bills, there have been many rumors about the negotiations but little certain information.  The three climate titles, which the House conferees voted overwhelmingly to reject, are reportedly back in the mix at least in some form.  Indications are that the Bush administration has been pushing for a bill and have let it be known that they could accept several major anti-energy provisions, including the Renewable Portfolio Standard for electric utilities.

 

U.S. Climate Negotiator Downplays Kyoto’s Trade Implications

 

Dr. Harlan Watson, the U.S. senior climate negotiator, said in Brussels on October 9 that it is possible that the U.S. could face trade disputes due to its unwillingness to ratify the Kyoto Protocol, but that such challenges were unlikely to succeed.  Environmental activists have already filed suit against the Overseas Private Investment Corporation and the Export-Import Bank, U.S. government agencies which environmentalists allege are responsible for global-warming-induced damages.  They also support a challenge against the U.S. in the World Trade Organization.

 

But Watson said that he doesn’t think that a country could successfully use trade rules to challenge the U.S. position on the Kyoto Protocol.  “We do not believe that, based on what came out of Doha (the 2001 agreement to launch a new round of WTO talks), it will be a problem, but it won’t prevent perhaps action being undertaken at some point,” said Watson.  “We do not believe we can be penalized for not entering a treaty regime that we have not agreed to” (Reuters, October 10, 2002). 

 

Justice Department Opposes California Emissions Law

 

On October 9, the U.S. Department of Justice weighed in on the side of the auto manufacturers in opposing a California requirement that 10 percent of motor vehicles sold in the state, for the model years 2003 to 2008, must achieve zero emissions.  According to DOJ’s filing to the federal court of appeals in San Francisco, California’s zero-emission mandate encroaches on federal authority.

 

“The Energy Policy and Conservation Act provides that when a federal fuel-economy standard is in effect, a state or a political subdivision of a state may not adopt or enforce a law or regulation related to fuel-economy standards,” argued the Justice Department.

 

California claims that there is an exception within the federal Clean Air Act that allows it to set its own fuel-economy standards, but Justice said that Congress never authorized the states to enact their own regulations.

 

With the date of implementation rapidly approaching, General Motors Corp., Daimler Chrysler Corp. and several California auto dealers won a preliminary injunction to delay the mandate for two years.   This lawsuit is not related to the California law passed earlier this year that limits vehicle emissions of carbon dioxide (Associated Press, October 9, 2002). 

 

Center Urges Mandatory Emissions Trading

 

A new report released by the Center for European Policy Studies’ Task Force on Emissions Trading and the New EU Climate Change Policy concludes that an EU emissions trading scheme will only be successful if it is mandatory, and that certain industrial sectors should not be excluded.

 

In a voluntary scheme, member states or companies would determine whether or not they would accept the targets and engage in trading, which would mean that those with low abatement costs would have little incentive to participate in a market with higher abatement costs.  This would lead to a market with many sellers and few buyers.  “A trading scheme based on on-going voluntary participation is not likely to work,” says the report.  “Such a scheme would lead to a market with an imbalance between sellers and buyers, thereby restricting the liquidity and, more generally, the efficiency of the market.”

 

The report supports the controversial European Commission proposal that insists on a mandatory system, even though many of the EU member countries want a voluntary system.  Denmark, which currently holds the rotating EU presidency, hopes to complete an agreement on an emissions trading scheme by October 17 when the Council of Environment Ministers meets in Luxembourg.  But disagreements over whether the scheme should be voluntary or mandatory is a major obstacle to reaching an agreement.  The United Kingdom and Germany are the most vocal nations calling for a voluntary scheme.

 

If a voluntary scheme is adopted, says the report, it should be “combined with incentives for companies or sectors to join as early as possible.  Such incentives could [include] the initial method of allocation, the coverage of greenhouse gases, the choice of baseline year, sector coverage, price caps on the cost of allowances, banking into the Kyoto Protocol’s first commitment period (2009-2012).”

 

The report admits that any emissions trading scheme is likely to have “considerable distribution effects on the controlled sources, consumers and governments, i.e. there are likely to be winners and losers.”  The EU should attempt to “strike a reasonable balance between the different interests,” but there is no perfect solution.

 

One of the major benefits of an emissions trading scheme, according to the report, is that it allows participants to reach their targets at least cost.  Moreover, the resulting carbon price would create “long-term predictability for business, which is a crucial element allowing efficient investment decisions in carbon-reduction technologies and techniques.”  This is not clear, however.  Many economists have pointed out that when the supply of emission credits (or any other commodity) is fixed, prices are very sensitive to changes in market conditions leading to large fluctuations in price, thereby decreasing predictability.

 

The report’s executive summary is available at http://www.ceps.be/Pubs/2002/Executive%20Summaries/GHGEmissTrad.pdf.

 

Economics

 

Russia Wants to Burn More Coal

 

Russian President Vladimir Putin wants his country to make greater use of its coal reserves, which are estimated at 3 trillion tons.  But this would make it difficult for Russia to meet its Kyoto target, not to mention that it would eat up all of its available “hot air” emissions credits that many countries are counting on to meet their own targets.

 

The Kyoto Protocol cannot come into effect unless either the U.S. or Russia ratifies the treaty.  Since the U.S. has already said it won’t ratify, it is up to Russia to win the day.  At the World Summit on Sustainable Development in Johannesburg, Russian Prime Minister Mikhail Kasyanov said that “Ratification will take place in the very near future.”  But Putin’s call for exploiting coal puts this commitment into doubt yet again.   

 

Environmentalists are not pleased.  “By preparing to burn more coal for its energy needs, Russia aims to free more natural gas for lucrative exports to Western markets,” said Natalia Olefirenko, climate programs coordinator with Greenpeace Russia.  “It is a flawed approach, and it amounts to a sell-out of the Russian environment because growing use of coal is likely to adversely affect the country’s ecological balance and cause acid rain” (Asia Times, October 3, 2002).

 

EU to Miss Kyoto Target

 

The International Energy Agency’s Chief Economist, Fatih Birol, said that the European Union will not be able to meet its Kyoto targets even with new policies to promote the use of renewable energy.

 

Even if the EU were able to increase the share of renewable energy to produce electricity to 30 percent by 2030, it would still fall short of Kyoto.  “Fossil fuels will still dominate,” said Fatih.  “Even with these alternative policies [on renewables] we don’t reach the Kyoto targets.”

 

In a business as usual scenario, the EU’s emissions of carbon dioxide would rise to 3,146 million tons in 2010 and to 3,829 by 2030, compared to the 1990 baseline of 3,080 tons.  With the above-mentioned renewable policies, emission would only be 4.9 percent less than the business as usual scenario in 2010, but still higher than the 1990 baseline.  In 2030, emissions would be 19 percent less than business as usual, but still higher overall (Reuters, October 2, 2002).

 

EU to Chase the Hydrogen Holy Grail

 

The European Union has announced that it will initiate a major investment project to develop hydrogen power.  According to European Commission President Romano Prodi, this effort will be just as important to Europe as the space program was for the United States in the 1960s, but “We expect an [even] better technological fallout,” he said.

 

The EU plans to spend $2.09 billion from 2003 to 2006 on hydrogen-related renewable energy development.  Apparently the EU sees this as a hydrogen race with the U.S.  Earlier this year the Bush administration launched the Freedom Car project, a fuel cell research effort, and has asked Congress to provide $150 million in funding.

 

But there is little reason to believe that such efforts will yield dividends.  As noted by the Wall Street Journal (October 16, 2002), “Meanwhile, for all the hope surrounding hydrogen, it is still years, if not decades, away from making significant inroads into the power and transport markets, which currently account for most of the world’s oil and gas use.”  Hydrogen is much more expensive than traditional fuels and would require massive infrastructure investments.

 

What the Journal fails to mention is that hydrogen is not an energy source, but merely a way to store and transport energy.  That is due to the fact that there are no free standing sources of hydrogen.  It must be extracted from water or other sources, which requires energy.  It then must be re-oxidized to extract the energy.  Energy is lost throughout the process, so that when all is said and done, less energy is produced than was used to get the hydrogen in the first place.  The only way to overcome that is to circumvent the laws of thermodynamics.

 

Solar Power Plant Not So Impressive

 

Arizona Public Service Co. has begun construction on what will become one of the largest solar power plants in the world and could supply electricity for up to 3,000 homes.  Solar power advocates are “oohing” and “aahing” over the power plant, but even this solar power behemoth is not that impressive.

 

Herb Hayden, director of APS’s solar energy program, acknowledges that the biggest obstacle for solar power is that it costs twice as much as electricity produced from conventional fuels, but he thinks the project will break even.  APS had been able to cover most of its costs on other solar projects by selling the power at a premium through its Solar Partners Program.  Participating customers-about 3,000-pay a monthly premium (read donation) for 15-kilowatt-hour blocks of renewable power.  “It doesn’t cover the costs, but it shows the product has value,” Hayden said.

 

The power plant, which will eventually produce 5.5 MW of electricity, will occupy 50 acres near the airport in Prescott, Ariz.  By comparison, a small-to-midsize natural gas power plant that produces 250 MW of electricity occupies only a few acres.  To equal that output using solar technology would require the use of about 2,300 acres.

 

APS currently has seven other solar power projects which produces a total of 1.7 MW of electricity and has committed to spending $12 million a year on solar power through 2004.  A large part of the cost will be covered by surcharges on electricity bills, from 35 cents per month for residential customers to $39 per month for industrial customers.  The surcharge raises about $20 million per year.

 

Hayden may be forgiven his somewhat misguided optimism since his company has little choice in the matter.  The Arizona Corporation Commission approved in 2000 the Environmental Portfolio Standard, which forces investor-owned utilities to generate at least 1 percent of the electricity they sell from renewables.  APS must generate 25 MW of electricity from renewable resources.  They might as well smile about it.

 

Science

 

The Meaning of Global Warming Claims

 

On September 30, Richard S. Lindzen, the Alfred P. Sloan professor of meteorology at MIT, gave a presentation “On the Meaning of Global Warming Claims” at a congressional briefing sponsored by the Cooler Heads Coalition.  Lindzen is one of the leading critics of the claim that increasing atmospheric levels of greenhouse gases have “ominous implications” for mankind or the environment.

 

He began the presentation with a quick climate history of the last one hundred years and what that history means within the context of this debate.  The warming during this period, said Lindzen, is concentrated in two periods, 1919-1940 and 1976-1986.  The Earth cooled between these warming periods, and since 1986 there has been no significant warming.

 

A doubling of atmospheric concentrations of carbon dioxide, according to model predictions, would increase the temperature by about 1.5 to 4.5 degrees Celsius.  We are already more than halfway towards a doubling of carbon dioxide, which has increased from about 280 parts per million to about 370 ppm.  If all the warming in the past century was due to manmade carbon dioxide emissions, said Lindzen, it would mean that the climate is not very sensitive to changes in greenhouse gases and that pronounced warming is unlikely.

 

Lindzen argued that, “If most current climate models, which predict about 4 degrees C warming for a doubling of CO2, are correct, then man has accounted for 3 - 4 times the observed warming over the past century with some unknown processes of unprecedented magnitude canceling the difference.  Predictions for the future assume that these unknown processes will disappear.”

 

The real problem in the global warming debate, Lindzen said, isn’t so much the disagreement between scientists.  Indeed, “There really is relatively little disagreement among scientists on a number of basic aspects of this issue.”  The problem has to do with how the basic facts are communicated to the public.  Scientists who insist on pointing out the “profound disconnect between scientific meaning of common statements and the public interpretation,” are marginalized as “skeptics.”

 

Rather than trying to solve this communication problem, many scientists, as well as environmental advocacy groups and politicians, have decided it would be easier to exploit it and have become quite adept at doing so.  Lindzen argued that probably the best example of how a statement can mean different things to scientists and the public is from the Intergovernmental Panel of Climate Change’s Second Assessment Report.  It stated, “The balance of evidence suggests a discernible human influence on global climate.”  To a scientist this statement does not imply that there is a problem, yet it was the “smoking gun” for Kyoto.

 

Lindzen also presented examples of where the scientific consensus is actually the opposite of what is presented in public. It has often been claimed that global warming will lead to increased storminess in the extratropics, but in fact, theory and observational evidence do not support this claim and there is general agreement on this in the scientific community.

 

Finally, Lindzen noted that although many environmental advocates and politicians claim that Kyoto would “solve” global warming, scientists agree that, “Complete adherence to Kyoto will have no significant impact on climate, regardless of what one believes about climate sensitivity.”

 

Land Cover Changes Contribute to Climate Change

 

A NASA funded study, appearing in the August 2002 issue of Philosophical Transactions of the Royal Society of London, has found that land use changes may be at least as important as greenhouse gas emissions in accounting for climate change.  Growing urban areas, deforestation and reforestation, agriculture and irrigation can have strong influences on regional temperatures, precipitation and large-scale atmospheric circulation.

 

Different land surfaces have different effects on how the Sun’s energy is distributed back to the atmosphere.  Changes in land cover can significantly affect temperature and other climate variables.  “Our work suggests that the impacts of human-caused landcover changes on climate are at least as important, and quite possibly more important than those of carbon dioxide,” said Roger Pielke, Sr., an atmospheric scientist at Colorado State University, and lead author of the study.  “Through landcover changes over the last 300 years, we may have already altered the climate more than would occur associated with the radiative effect of a doubling of carbon dioxide” (www.sciencedaily.com, October 2, 2002).

 

THE COOLER HEADS COALITION

 

Alexis de Tocqueville Institution

Americans for Tax Reform

American Legislative Exchange Council

American Policy Center

Association of Concerned Taxpayers

Center for Security Policy

Citizens for a Sound Economy

Committee for a Constructive Tomorrow

Competitive Enterprise Institute

Consumer Alert

Defenders of Property Rights

Frontiers of Freedom

George C. Marshall Institute

Heartland Institute

Independent Institute

JunkScience.com

National Center for Policy Analysis

National Center for Public Policy Research

Pacific Research Institute

Seniors Coalition

60 Plus Association

Small Business Survival Committee