Vol. VI, No. 9

Vol. VI, No. 9

May 01, 2002

Politics

Senate Passes “Energy” Bill Loaded with Global Warming Policies

 

On April 25, the Senate overwhelmingly passed comprehensive energy legislation by a vote of 88-11.  Ironically, neither Senate Republicans nor Democrats seemed pleased by the end product.

 

The Senate bill (formerly S. 1766, then S. 517, and finally passed as H. R. 4) has little in common with either the energy bill the House passed last August or the Bush administration’s energy plan released in May 2001.  Instead of provisions designed to rebuild America’s energy infrastructure and provide more secure and abundant supplies of energy, the key parts of the Senate bill would raise energy prices for consumers and create countless new government programs, offices, agencies, and reports.

 

Many key parts of global warming bills introduced in the Senate during this Congress are included.  Title XI, which in Majority Leader Tom Daschle’s (D-S.D.) original version provided for a mandatory registry of greenhouse gas emissions, was replaced with a complex amendment offered by Senators Jon Corzine (D-N.J.) and Sam Brownback (R-Ks.).  Their amendment was accepted after an attempt led by Senators Chuck Hagel (R-Neb.) and George Voinovich (R-Ohio) to replace the mandatory registry with a voluntary one was withdrawn because it lacked majority support.

 

The Brownback-Corzine amendment creates a registry of emissions that would be voluntary in name only.  Unless 60% of total U.S. GHG emissions are reported within five years, the registry would automatically become mandatory, although farms and feedlots would be exempt.  The amendment would require the reporting of indirect as well as direct emissions, which means that automakers, soda bottlers, and brewers are likely to be forced to report emissions from their products.

 

Among numerous other global warming provisions, the bill re-directs the efforts of the U.S. Global Change Research Program and makes it a part of the National Oceanic and Atmospheric Administration and includes “sense of the Senate” language that supersedes the Senate’s 1997 Byrd-Hagel resolution.

 

The Senate-passed version also includes a renewable portfolio standard that requires that ten percent of electricity produced by utilities be generated from non-hydro renewable sources by 2019.  Another provision designed to raise energy prices - an expanded ethanol mandate that will triple the amount of ethanol required in gasoline by 2012 - survived repeated attempts by Senators Dianne Feinstein (D-Calif.), Barbara Boxer (D-Calif.), Charles Schumer (D-N.Y.), and Hillary Clinton (D-N.Y.) to remove or weaken it. 

 

The Senate and House versions of H.R. 4 now go to a conference committee, which will try to produce a compromise bill acceptable to both chambers.

 

Eileen Claussen, executive director of the Pew Center on Global Climate Change, a front group for corporations that hope to profit from energy rationing, was elated over the climate provisions in the bill.  “This is more activity than we've seen on climate change in the Congress, I think, ever, which is a very positive sign,” she said (Los Angeles Times, April 26, 2002).

 

Vehicle Emissions Bill Passes California Senate Committee

 

A California Senate Committee has approved, by a vote of 8-3, AB1058, a bill to reduce greenhouse gas emissions from California automobiles.  The measure has already passed the California Assembly, and will be voted on by the full Senate as early as next week.

 

“The bill,” according to Reuters (May 1, 2002), “would require the state’s Air Resources Board to adopt regulations that would achieve ‘the maximum feasible reduction’ in emissions of greenhouse gases, including carbon dioxide, emitted by cars and light-duty trucks, the category that includes sport utility vehicles.”  The bill originally would have required the regulations to be completed by 2005 and would take effect on January 1, 2006, but an amendment to the bill would give automakers until 2009 to comply with the new standards.  

 

Automakers are attacking the bill, arguing that it is a “driving tax” that would severely impact sales of SUVs, which account for 47 percent of the vehicles sold in California.   The bill’s author, Assemblywoman Fran Pavley of Woodland Hills, dismisses the auto industry’s complaints.  She claims that automakers will have no problem meeting the new standards, noting that Ford will be coming out with a new gas/electric ‘hybrid’ SUV in the near future.  “A lot of automakers have cars in the works that will offset CO2 emissions,” Pavley said.

 

EU Hits Rio Target, But Likely to Miss Kyoto Target

 

The European Union has announced that it has reached the greenhouse gas reduction target that it agreed to under the 1992 United Nations Framework Convention on Climate Change.  The voluntary target was to stabilize greenhouse gas emissions at 1990 levels by 2000.  The EU claims that it reduced its emissions to 3.5 percent below 1990 levels in 2000.

 

Although the European Commission congratulated itself for the success, it also expressed concern over increases in greenhouse gas emissions between 1999 and 2000.  Emissions of carbon dioxide rose by 0.5 percent while emissions of five other greenhouse gases rose by 0.3 percent.

 

The commission warned that under existing policies the EU would not meet the target it agreed to under the Kyoto Protocol, which is to reduce emissions to eight percent below 1990 levels by the 2008-2012 compliance period.

 

“All member states except for the United Kingdom project their emissions by 2010 will be above their burden-sharing target under the Kyoto Protocol,” said Commission spokeswoman Pia Ahrenkilde.  “The new EEA [European Environment Agency] data confirm that in the year 2000 most member states were well above their target path to Kyoto.”

 

The EU has been trying to implement a Europe-wide tax on greenhouse gas emissions for ten years, the latest being a “harmonization” tax that has been under negotiation for three years.  A recent agreement between the member states may clear the way for it to be in place by the end of 2002.  Other measures awaiting approval by member states are an emission trading scheme, and renewable energy and energy efficiency requirements (BNA Daily Environment Report, April 30, 2002).

 

Wind Power Meets Air Power

 

Five planned offshore wind power projects in the United Kingdom have run into a difficult snag.  The Ministry of Defense has decided that the projects would interfere with military flights and radar.  According to the British Wind Energy Association, if the Ministry of Defense successfully blocks the wind projects, then it would have a serious impact on the country’s ability to meet its renewable energy goals.

 

“If they are built, the 18 sites would provide more than one percent of the U.K. electricity supply,” said BWEA communications chief Alison Hill.  “The government’s own legal requirement is that 10 percent of its electricity is from renewable energy by 2010.  It is widely expected that wind power and offshore will provide half of that.”

 

BWEA claims that by applying radar-reflective paint the projects will pose no problem for the military (Reuters, April 24, 2002).

 

 

 

 

Economics

 

Taxes, Taxes Everywhere

 

The New Zealand government has approved a new energy tax to help control greenhouse gas emissions.  The tax on vehicle fuel, electricity and natural gas will cost households an average $2.25 per week starting in 2007.  The tax will also raise business energy costs by nine percent.  New Zealand is expected to ratify the Kyoto Protocol in August.

 

Several sectors of the economy have been made exempt from the tax, however.  High-energy-using export industries will be exempt, but in return for the exemption they will have to take measures to reduce greenhouse gas emissions.  The farm sector is also exempt from paying taxes on all agriculture-related emissions, but will be required to invest $6.7 million per year to research methods for reducing agricultural greenhouse gas emissions. 

 

New Zealand business groups have argued that the government’s plan would hurt the economy.  “The risk for New Zealand is that we will achieve neither the intended climate change outcomes nor encourage others.  It’s more likely that our economic, trading and export competitiveness will be damaged,” said Simon Carlaw, Business New Zealand Inc.’s chief executive (Reuters, April 30, 2002).

 

Canada is also considering a gasoline tax.  It was reported in the National Post on April 19 that the federal government was considering a tax of 10 Canadian cents per liter, but the rate was denied by Canada’s Environment Minister David Anderson.  He did say, however, that a gas tax is an option (Reuters, April 26, 2002).

 

Energy taxes in Germany have raised household energy bills by seven percent over the last year.  However, energy bills are still lower than they were before Germany liberalized its energy markets (Reuters, April 30, 2002).

 

In London, the Royal Society has announced that it will look into what further measures are necessary in order for Britain to meet its Kyoto Protocol commitments.  A new carbon tax on top of the Climate Change Levy appears to be at the top of the list of likely recommendations (Reuters, April 29, 2002).

 

Domingo Jimenez-Beltran, the head of the European Environment Agency, told Reuters in an interview published on April 18 that the world needs a global tax on fossil fuels.  “Unless you get some global taxation, it will be impossible to tackle the effects of globalization,” Jimenez-Beltran said.

 

Earlier, Cooler Heads (April 17, 2002) reported that the European Union is planning an EU-wide tax on aviation fuel.

 

Cap-and-Trade Follies

 

In a guest commentary for Electricity Daily (April 29, 2002), David Wojick points out some of the serious flaws behind the assumptions underlying cap-and-trade schemes to reduce emissions.

 

Wojick points out that “emissions allowances” are nothing more than ration coupons that can be bought and sold.  The idea of cap-and-trade systems is that all else being equal, “firms with high compliance costs can buy allowances from those with lower costs.  If the price is set by the cost of compliance, another big if, the total compliance cost for all firms will be lower than if every firm has to go it alone.”

 

The assumptions underlying this claim, however, “ignore the complexities of market dynamics in general, and the structure of technology in particular,” said Wojick.  The simple equilibrium models used to simulate how a cap-and-trade system might work assume a marginal cost of compliance curve for each facility and add an allowance allocation mechanism.  The market clearing price is then calculated and voila, everybody is in compliance at a lower cost.

 

“But at the facility level,” says Wojick, “the system is hugely ‘lumpy.’  Existing power plants, plus any new ones, are very large, so emission control systems are also very large, both in cost and in the time it takes to build them.  In extreme cases, an emission control system may cost a third as much as the plant itself, and take five years to design, buy, and build.  In many cases, there is only one technology option, as far as cost and time are concerned.  One either builds or does not.”  There is no marginal cost curve for a given facility.

 

Such a system cannot be optimized even with perfect information, an assumption that makes the models workable, but does not apply in the real world.  Limited information about other’s intentions and future changes in power demand make it impossible for firms to make rational business decisions.  “The economic system described above,” says Wojick, “is likely to resemble a commodity system, because both are driven by lumpiness, lack of information, and unpredictability. The dynamics of such systems are ‘shortage… glut … shortage … glut,’ or glut first, not equilibrium.”

 

Aussie Power Bills to Include Individual Emissions

 

In hopes of convincing the households and businesses of Victoria, Australia to change their energy consumption habits, the state government has announced that it will now list individual greenhouse gas emissions on consumer’s electricity bills. By linking global warming to electricity use, the state believes that it can convince consumers to reduce energy use and switch to renewable energy sources.

 

According to Victoria’s Energy and Resources Minister Candy Broad, “Victoria has a large generation from brown coal which makes our electricity very greenhouse-intensive, and that’s a very good reason to include this information on the bill to remind people of how they contribute to the state’s emissions.”

 

Science 

Bad Data Hurts Model Performance

 

An article appearing in the April 19 issue of Science looks at how accurately climate models are able to reproduce current and past climate.  What the authors conclude is that the models do a decent job of simulating the observed data, but that the data itself may not be that good.

 

“We can now test how well climate models simulate century-scale variations in the observed climate record,” say the authors, Thomas Smith, Thomas Karl and Richard Reynolds, at the National Climatic Data Center.  “There have been numerous intercomparisons of various climate model simulations of 20th-century climate, based on the best available estimates of the climate forcing.”

 

It is assumed that these simulations closely reproduce observed climate variability, but, “This assumption must…be viewed with caution,” say the authors.  “Observational errors, sampling errors, and time-dependent biases degrade the climate record.”  Although researchers have attempted to remove these errors, there are still problems.

 

The authors compare the errors in the computer models with the errors in the observed temperature record of worldwide sea surface temperatures (SSTs) which stretch back to the 19th century.  To illustrate model errors the authors run three separate computer simulations with identical forcings, but starting at different initial conditions.  By doing this they were able to “estimate the magnitude of the uncertainty introduced by a chaotic climate system.”

 

For the observed temperature record the authors calculated the uncertainty by comparing the range of SSTs derived from different observational errors, sampling errors and time-dependent bias adjustments.  “The errors in analyzed SSTs,” say the authors, “are comparable to the uncertainty estimate associated with climate chaos over much of the 20th century.”

 

They conclude, “Today’s models are thus within the observed uncertainty of the observations, at least with respect to the global SST record….  This does not imply that the model simulations are perfect; rather, it indicates that more attention must be given to improving the records of past climate and ensuring that future climate records have little or no time-dependent biases.

 

“It is unsettling that the uncertainty related to treatment of the data is increasing in recent decades in the most-sampled oceans. This points to the importance of developing a global observing system that not only has good spatial coverage, but more importantly, strictly adheres to guidelines and principles articulated by the U.S. National Academy of Sciences.”

 

Etc.

 

·      In an April 21 editorial in the New York Times, former Vice President Al Gore called Dr. Rajendra Pachauri, the new chairman of the United Nations Intergovernmental Panel on Climate Change, a “‘let’s drag our feet candidate’… who is known for his virulent anti-American statements.”

 

Dr. Pachauri responded in a letter to the editor in the May 1 New York Times, stating, “Mr. Gore’s derogatory statements about me reflect a deep disappointment at my election as chairman of the [IPCC], with 76 votes for me against 49 for his protégé, Dr. Robert T. Watson.

 

“In a 1999 speech, Mr. Gore, referring to my ‘commitment,’ ‘vision’ and ‘dedication,’ said; ‘Pachy is the one person in the world who could bring us all here…. He is known all over the community of concerned men and women as someone with the intellect and the heart.

 

“In ‘Earth in the Balance,’ Mr. Gore acknowledged me ‘among the other scientists who have been helpful in giving me advice during the writing of this book.

 

“Would the real Al Gore stand up?  Does what he says today hold no value tomorrow?”

 

Announcements

 

·      The Cooler Heads Coalition together with the Science and Environmental Policy Project and Frontiers of Freedom will hold a briefing on “Whatever Happened to Global Warming?” on Monday, May 13, from Noon to 2 PM in Room B-339 of the Rayburn House Office Building.  Speakers will include John Daly, who runs the highly regarded Still Waiting for Greenhouse web site in Australia, and climate scientists from Europe and North America.  Lunch will be served.  Attendance is free of charge, but reservations are required.  Please contact Ericka Joyner of CEI at (202) 331-1010, ext. 267, or e-mail her at ejoyner@cei.org.  Include your name, affiliation, and phone number.

 

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 AssociationSmall Business Survival Committee