Competitive Enterprise Institute | 1899 L ST NW Floor 12, Washington, DC 20036 | Phone: 202-331-1010 | Fax: 202-331-0640
New Bill to Implement Clinton-Gore Agenda
Just when it looked like the Clinton Administration’s global warming agenda was nearly buried some Republican lawmakers have begun to rehabilitate it. The "early action for credit" bill introduced by Senators Chafee, Leiberman and Mack would, if passed, grease the skids for eventual ratification of the defunct Kyoto Protocol, and a bill introduced by Senators Murkowski and Hagel legitimizes the "need" to reduce greenhouse gas emissions.
Now Representative Bill Thomas (R-Calif.) has introduced a bill, the Energy Efficient Affordable Home Act of 1999 (H.R. 1358) that would implement a part of Clinton’s rejected Climate Change Initiative. The bill would give a $2,000 tax credit for energy-efficient homes. To qualify for the tax credit a home would have to be 30 percent more energy efficient than required under the International Energy Conservation Code.
The bill has the support of the National Association of Home Builders, the North American Insulation Manufacturers Association, the Edison Electric Institute and other industry groups that would benefit financially from this corporate subsidy, as well as environmental and public interest groups (e-FFICIENCY News, May 11, 1999).
DOT Wants Global Warming Cash
Not to be outdone by its fellow federal agencies, the Department of Transportation announced on May 3 that it will create a $1 million "center for global climate change and environmental forecasting," to study greenhouse gas emissions. The new program would do scientific research, and assess new technologies and alternative fuels. Transportation Secretary Rodney E. Slater noted that the agency would work closely with the Environmental Protection Agency and the Department of Energy. "I’m just pleased that we in Transportation will not be taking a back seat on the issue of the environment," said Slater.
According to the Washington Post (May 2, 1999), the new center "will study new technologies to achieve higher fuel efficiency, tax credits for fuel-efficient cars, changes in travel behavior, transportation planning as a part of community development, and other methods of addressing global warming." Slater also announced that federal transportation experts would be made available to communities to help design projects as well as teach local officials and citizens how to acquire federal funds for transportation projects.
EU Agrees on Global Warming Plan
After long and contentious negotiations the European Union members finally came to an agreement on a common strategy to fight global warming. An early proposal would have restricted the use of flexible mechanisms, such as emission trading, to make sure that countries achieve most of their emission reductions through domestic actions.
Netherlands and Sweden had both rejected the plan asking for looser restrictions. But according to a German spokesman, "the Dutch and Swedish problem seems to be solved. The negotiating position will be adopted along with a special declaration noting their special problems" (Reuters, May 10, 1999).
Yellen Defends Economic Study
The Clinton Administration continues to defend its Kyoto cost estimates even though nearly everyone agrees that they are woefully overoptimistic. On April 29, Janet Yellen, chair of the President’s Council of Economic Advisors, testified before the House Small Business Committee, reaffirming the administration’s commitment to its cost estimates.
Yellen’s estimates that the cost of Kyoto will fall between $7 and $12 billion per year if the Annex I countries fully participate in an international emission trading system. The cost of a carbon permit representing 1 ton of carbon would only cost between $14 and $23. These estimates fall far below the estimates of other studies.
Yellen also claimed that improving forestry and agriculture management "have the potential to bring down the costs substantially." One of the problems with the administration’s claims is that they are all based on speculation. To date there is no agreement between the Annex I countries about emission trading, and the use of carbon sinks is an even more contentious issue. Moreover, as Yellen admitted in her testimony, the issue of carbon sinks is still very cloudy. There are no good estimates as to the extent to which carbon offsets could be used to reduce greenhouse gas emissions.
Committee Chairman James Talent (R-Mo.) asked Yellen if the administration had projected the future energy use of those countries from which the United States would want to buy emission allowances. She responded that these numbers were implicit in the estimates that she had given. When asked if she could make those numbers explicit she said she could not. Talent asked how it was possible to make estimates about allowance prices without estimating the supply and demand conditions that may exist.
Also testifying in the hearing was Robert Reinstein, president of Reinstein & Associates International. He did make those estimates and concluded that the supply of permits is insufficient to cover the demand. The demand for credits will be between 1.7 and 3 billion tons of carbon equivalent. "The maximum potential supply of credits available through emission trading," said Reinstein, "is less than 1.3 billion tons of carbon equivalent." This would occur in the case where the Russian and other Eastern European economies continue to stagnate. If they recover the supply will be considerably less.
Credits could also be earned through joint implementation and the Clean Development Mechanism. "Overall, I would estimate the likely total supply of emission credits from all three Kyoto flexibility mechanisms at between 200 and 500 million tons per year," said Reinstein. Under the best case scenario the supply of credits would cover about 30 percent of OECD country demand. Under business as usual the supply would cover just 7 percent of demand. The result would be a permit price of $150 to $200 per ton of carbon equivalent.
Cost of Kyoto for Agriculture
Several studies have attempted to ascertain the effect of global warming on agriculture. Overall they have found that U.S. agriculture would suffer little from global warming. Now a study has been done to determine the effects of global warming policy, specifically the Kyoto Protocol, on U.S. agriculture. Sponsored by the American Farm Bureau, American Corn Growers Assn., National Cattleman’s Beef Assn., United Fresh Fruit & Vegetable Assn., and the National Grange, the study shows that the Kyoto Protocol would have a severe economic impact on agriculture.
The study estimates that agriculture would suffer an 8.8 percent increase in production costs as well as a loss in sales of $5 billion at the farm level, due to lower GDP. Farm income would also fall by more than 50 percent. Most importantly, perhaps, is the claim that the Kyoto Protocol would have a disproportionate impact on low-income Americans. The study points out that 37 percent of U.S. households have an income of less that $20,000 after taxes. These households spend anywhere from 21.2 percent to over 100 percent of their after-tax income on food compared to the average U.S. consumer who only spends 11.9 percent. The poor would suffer the most from increased food prices. For more information contact the American Farm Bureau Federation at (202) 484-3600.
USDA Analysis Says Kyoto Would Have Minimal Effect on Farmers
In contrast to the agricultural sector’s study, the U.S. Department of Agriculture claims that the Kyoto Protocol will have little effect on farmers. The USDA assumes the existence of emission trading and bases its analysis on the Clinton Administration’s estimate of the costs of Kyoto on the American economy. The study, therefore, assumes a permit price of $23 per ton of carbon emissions.
According to the study, production costs would only rise by 0.6 percent and farm income would fall by a mere 0.5 percent. Changes in commodity prices would be barely noticeable, 2 cents higher per bushel of corn and only 1 cent per bushel higher for wheat and soybeans. The study also claimed that farmers could supplement their incomes by participating in carbon sequestration and methane reduction programs to earn emission allowances. The study attacks the recent economic analysis by farmers’ organizations, claiming that it does not account for "adjustments that farmers would make to changes in production processes." The study can be found at www.usda.gov .
Tornadoes not Linked to Global Warming
Like night follows day, global warming activists will blame the recent killer tornadoes in the Midwest on global warming. Scientists, however, don’t see such a link. According to Eugene Takle, a professor of atmospheric science at Iowa State University, "We haven’t seen an increase (in tornadoes) as yet." There has been "a lot more property damage," says Takle. "Many of the deadliest tornado years on record occurred in the 1950s and 1960s," according to the Kansas City Star (May 5, 1999). "In 1953, for example, 150 persons died in Texas in May; on May 25, 1955, 81 died in Kansas."
The key to preventing tornado deaths and property damage is "building better structures; locating structures out of areas prone to disaster; and acting on improved storm warnings."
Is India’s Heat Wave More Evidence of Global Warming?
At least one scientist, Dr. M. Lal from the Centre for Atmospheric Sciences at the Indian Institute of Technology, is claiming that India’s current heat wave "is a signal to global warming." He claims that last year was the hottest in the century in India and he predicts it will continue this year. S.C. Gupta, Director of Delhi Meteorological Office says that this is no different than past heat waves. Gupta argues that other severe heat waves have occurred in the past, such as the heat waves in 1941, 1958, 1973, and 1994.
According to Gupta, India always experiences extraordinarily high temperatures this time of year. Those temperatures are moderated, however, by western disturbances -- low pressure weather patterns that originate in the Mediterranean and move across Pakistan and into India -- that bring relief. Heat waves occur when these western disturbances are fewer in frequency. That is what has occurred this year, says Gupta. This year is nothing unusual (The Hindu, May 4, 1999).