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OpenMarket: Energy and Environment

  • There Are No “Neutral Taxes” in Politics

    February 25, 2015 10:24 AM

    Those favoring larger government are finding it harder to finance them by raising taxes. Proponents have sought to reduce opposition by claiming that they’re not really raising taxes at all—their taxes will be “neutral.” Sure, we’ll take $50 billion or so in taxes from the economy, but we’ll then put it back again in the form of tax reductions or rebates. From a macro-economic perspective, they argue, there will be no impact at all! Why bother, you might ask? 

    The prime candidate advanced by those seeking to better plan our economy is the carbon tax. We’ll tax carbon and use the revenues to offset its impact. People will use less energy but retain the same income. We’ll change prices without changing income—a highly targeted incentive package! To tax energy users is feasible, although complicated—simply tax all energy materials. But farmers have traditionally escaped gas and diesel taxes for on-farm use—will this exemption be repealed? 

    In many regions, people use natural gas, oil, and electricity (which in turn uses coal, natural gas, and some hydro and nuclear). The prices of some of these energy types is market driven, while others are regulated. The income impact on specific consumers is not easily ascertained nor is the appropriate rebate. The result is that the micro-impact of energy taxes is never neutral. Individuals in areas dependent on coal or oil will lose; individuals in areas where climate or policy has shifted to solar or other renewable energy will gain relatively. And this critique fails to note another problem: the tendency of politicians to use new tax revenues to gain support for the measure.  Since different groups have different priorities, the result is often to “spend” the new tax revenues many times over. Rebates, being complicated and having no strong political champion, are likely to receive low priority.

  • Gas Tax Mission Creep: From User-Pays to Carbon Tax?

    January 26, 2015 9:39 AM

    The Niskanen Center is a new libertarian think tank that we at CEI look forward to working with on a number of issues. However, one where we are unlikely to agree is on the virtues of a real-world tax on carbon emissions. Sarah E. Hunt had a post last week over at the Niskanen Center's Climate Unplugged blog arguing that Senate EPW chairman Jim Inhofe's recent defense of the federal gas tax as an infrastructure user tax is at odds with his antipathy to a carbon tax.

    Now, I have criticized Sen. Inhofe's blindspot on infrastructure spending in the past, as he has long admitted he is "a big spender in two areas: national defense and infrastructure." But is Sen. Inhofe's position on the federal excise taxes on motor fuels really contradictory? Under closer examination, the answer is no.

    Sen. Inhofe supports fuel taxes in the way they have been used since 1956, when Congress greatly expanded the federal-aid highway programs to construct the Interstate Highway System. Built upon the user-pays/user-benefits and pay-as-you-go principles, Congress directed the proceeds from highway user taxes into the Highway Trust Fund, which was intentionally designed to bypass the general treasury and annual appropriations battles. Multi-year highway (and later transit) program reauthorization legislation then specified outlays to various formula-based disbursement programs that flow to state departments of transportation, with Congress setting total outlays to approximate projected revenues over that period.

    Of the four major fuel tax increases since the modern federal-aid system was established, two were solely infrastructure revenue-raisers, one was half user-tax and half deficit reduction, and one, the last increase in 1993 that brought the current rate up to 18.4 cents per gallon of gasoline, was intended solely for deficit reduction. That 4.3-cent increase from 1993 aimed at deficit reduction was redirected to the Highway Trust Fund in 1997. This is where the federal gas tax rate sits today.

    Note that promoting environmental benefits appears nowhere above. Regardless of your position on federal fuel taxes, they have never been used for any purpose other than dedicated infrastructure funding and, very occasionally and temporarily, deficit reduction.* In recent years, the traditional federal-aid system has started to break down, with Congress refusing to either reduce outlays to meet projected revenues or increase the fuel tax rates. Instead, Congress has bailed out the Highway Trust Fund with over $50 billion in general funds over the past decade, moving the U.S. in a road socialist direction.

  • Free to Prosper: Top Priorities for the 114th Congress

    January 14, 2015 9:29 AM

    With the start of the 114th Congress comes a fresh opportunity to address the challenges created by a broken government. To kick off this new congressional session, the Competitive Enterprise Institute (CEI) recommends numerous reform proposals to strengthen the U.S. economy, increase transparency, and foster fair and open competition instead of favoring special interests.

    CEI’s top policy proposals center on substantive regulatory reforms needed to improve America’s economic health. In 2014 alone, 3,541 new regulations hit the books, and the burden is constantly growing. If federal regulations were a country, their cost would amount to the world’s 10th largest economy.  

    In addition to reining in burdensome regulations, CEI recommends that Congress continue to conduct fundamental oversight to protect Americans from executive overreach. Over the last six years, federal agencies have sought to usurp power from the legislative branch. Congress has a responsibility to demand honesty and accountability from our leaders and defend the rule of law.

  • Activist Science Undermines Research on Honeybees and Pesticides

    December 15, 2014 11:27 AM

    As reported in a blog post by David Zaruk, some of the “science” on the impact of neonicotinoid pesticides on honeybees appears to have resulted from a pre-orchestrated campaign, rather than an unbiased scientific process. The researchers involved are members of the International Task Force on Systemic Pesticides, which is part of the International Union for Conservation of Nature (IUCN). 

    The task force was ostensibly set up “to bring together through research an integrated assessment of the worldwide impact of systemic pesticides on biodiversity and ecosystems, based on articles published in peer-reviewed scientific journals.” But Zaruk explains that he discovered a document indicating that the effort was more political than scientific.

    The document summarizes a workshop held at the University of Paris back in 2010 at which task force members outlined a strategy designed to make the case that neonicotinoids do in fact harm bees—drawing that conclusion before completing an unbiased, scientific assessment. To that end, it appears that they planned out where they would place studies condemning the chemicals to gain political impact, rather than exploring how they would critically review the body of research.

    IUCN is in fact an activist group, so their desire to undermine chemicals is not all that surprising.  But this case does show how activism has permeated scientific research, confusing the world about the state of science on many issues. While we all have opinions, there needs to be a clearly defined line between policy goals and scientific research. 

    As Zaruk notes: “[N]o credible scientist starts with a campaign strategy and then conjures up some evidence as an afterthought to fit his or her activist agenda. That is not science!”

    Indeed, legitimate scientific discovery requires that researchers try to keep their biases in check, rather than plan studies and placements to garner a desired political objective. In fact, researchers are supposed to begin with a hypothesis and conduct experiments aimed at disproving that hypothesis. So researchers do not leap to conclusions too quickly, scientists are trained to search extensively for reasons to reject their hypotheses. That means that rather than try to prove their theory, they act as a sort of devil’s advocate, attempting to show no effect. In that case, biases may be kept in check and positive associations should be more robust.

  • New Field Study Confirms Neonicotinoids Have Little Impact on Honeybees

    November 24, 2014 9:58 AM

    As the Ontario provincial government in Canada considers policies that may force farmers to stop using, or drastically reduce use of, a class of pesticides called neonicotinoids, a new study shows why such policies are unlikely to do any good. Supposedly, limiting use of these pesticides will improve honeybee hive health, but such regulations will simply make it harder for farmers to produce an affordable food supply.

    The study, which relies on data from actual field conditions, confirms that farmers can protect their crops using these chemicals without harming honeybee hives. Published in PeerJ, it assessed the impact of neonicotinoid-treated canola crops on hives that foraged among these crops in 2012. The researchers found no adverse impacts and very low exposure to the chemicals. The authors report:

    Overall, colonies were vigorous during and after the exposure period, and we found no effects of exposure to clothianidin seed-treated canola on any endpoint measures. Bees foraged heavily on the test fields during peak bloom and residue analysis indicated that honey bees were exposed to low levels (0.5–2 ppb) of clothianidin in pollen. Low levels of clothianidin were detected in a few pollen samples collected toward the end of the bloom from control hives, illustrating the difficulty of conducting a perfectly controlled field study with free-ranging honey bees in agricultural landscapes. Overwintering success did not differ significantly between treatment and control hives, and was similar to overwintering colony loss rates reported for the winter of 2012–2013 for beekeepers in Ontario and Canada. Our results suggest that exposure to canola grown from seed treated with clothianidin poses low risk to honey bees.

    Despite all the media hype about how these chemicals harm honeybees, these findings are not surprising.  Research condemning these chemicals has tended to focus on lab studies that overdose bees to see if pesticides affect hive health. But those studies have little relevance to real-life exposure to these chemicals in the field. The U.S. Agricultural Research Service’s Kim Kaplan explains that such studies have “relied on large, unrealistic doses and gave bees no other choice for pollen, and therefore did not reflect risk to honey bees under real world conditions.”

  • Taxpayer-Funded Green Ministries in Prince George's County Violate the Constitution

    November 21, 2014 3:15 PM

    Reporters like separation of church and state, unless it’s progressives violating it. Then, they lose interest in the concept. A recent Washington Post story cheerily reported on churches getting exemptions from a state-mandated stormwater fee (Maryland’s “rain tax”) in exchange for taking “green” positions, in the progressive bastion of Prince George’s County, Maryland. The story did so without even mentioning the serious issues that raises under the Establishment Clause and the First Amendment.

    This sets a dangerous precedent. As legal commentator Walter Olson asks, “Since when does government get the power to cut churches tax breaks in exchange for their agreement to preach an approved line?”

    This violates freedom of speech under the unconstitutional conditions doctrine. Under Supreme Court precedent, you can’t condition a valuable government benefit like a tax exemption on someone’s speech. Speiser v. Randall, 357 U.S. 513 (1958), was a Supreme Court case addressing California’s refusal to grant a veteran a tax exemption because he refused to sign a loyalty oath as required by a California law. The Supreme Court ruled that the condition violated the First Amendment. The Supreme Court has reaffirmed this “unconstitutional conditions” doctrine in many other cases and contexts, such as in Dollan v. City of Tigard, 512 U.S. 374, 385 (1994).

  • Obama’s Meaningless China Deal on Climate Change

    November 12, 2014 1:41 PM

    Myron Ebell discusses the recent climate deal between President Obama and Chinese President Xi at APEC:

    U. S. President Barack Obama and Chinese President Xi Jinping announced a commitment by both countries to limit greenhouse gas emissions by 2025-30, at the end of the APEC summit meeting in China on Wednesday.  President Obama pledged that the United States would reduce it emissions by 26-28% below 2005 levels by 2025, while President Xi pledged that China’s emissions would peak by “around 2030, with the intention to try to peak early, and to increase the share of non-fossil fuel share of all energy to around 20% by 2030.”  That quote is from the White House fact sheet on the agreement.

    It is not clear what President Xi’s commitment means, but President Obama’s signature on the deal has no legal force.  And it will be up to future Presidents and Congresses after he leaves office in January 2017 to decide whether to require the emissions reductions agreed to.

    There is also the little obstacle of Congress.  Republicans take control of the Senate in January.  Majorities in both the House and Senate will be opposed to the Obama Administration’s climate agenda.  It seems certain that they will be even more opposed to the new 26% cut by 2025 goal than they are to the 17% by 2020 goal.  My guess is that there will be votes on a resolution disavowing President Obama’s new commitments in both the House and Senate early in the 114th Congress. 

    Read the full commentary on GlobalWarming.org

  • Green Exploitation of the Monarch Butterfly

    October 20, 2014 9:52 AM

    Butterflies offer powerful imagery for environmental groups looking to advance their agendas. After all, who doesn’t want to save these beautiful creatures? Surely green activists could leverage those desires to advance voluntary efforts to create butterfly habitat. But the actions of some groups indicates that they would rather exploit the butterflies to gain policy victories in Washington, even if the butterflies suffer as a result.

    Conservationists rightly point out that monarch butterflies face challenges associated with habitat loss because there are not enough of the type of plants that they need for food and reproduction. In particular, these creatures feed and reproduce among milkweed, a flower that many people consider to be nothing more than an undesirable weed. As a result, farmers, homeowners, and other property owners have removed these plants, leaving less habitat for the butterflies. 

    Part of the solution is rather simple: educate people about the value of this plant. If we can transform what people think about it, we might just get more individuals to plant it rather than pull it up. 

    A massive educational campaign pushed by environmental groups, which collectively have tens of millions of dollars at their disposal, could make the critical difference. Some groups are working this angle, but too many others would rather spend the money to lobby for more government controls on businesses and property owners.

    The green lobby’s agenda includes suing the U.S. Environmental Protection Agency to prevent approval of a new herbicide formulation because they say it will enable more destruction of milkweeds. They are also calling for the listing of the monarch butterfly under the Endangered Species Act (ESA). It may be counterintuitive, but both actions may actually undermine butterfly habitat and contribute to its demise.

  • Results of "Cash for Appliances"

    October 7, 2014 9:26 AM

    Under the American Recovery and Reinvestment Act of 2009 (commonly called "the stimulus"), a $300 million program to subsidize consumer purchases of energy-efficient appliances called the State Energy Efficient Appliance Rebate Program was established. A recent working paper from the National Bureau of Economic Research analyzes the results of the "Cash for Appliances" subsidy scheme. It turns out that "Cash for Appliances" was an incredibly inefficient energy-efficiency program. From the conclusion:

    We estimate freeriding rates of 73% to 92% across our three appliance categories. As a result, our measures of cost-effectiveness, ranging from $0.44 to $1.46 per kWh saved, are an order of magnitude greater than the $0.06 per kWh average cost-effectiveness estimated for utility-sponsored energy efficiency programs. Even after generous assumptions about accelerated replacement, the cost per kWh saved of C4A remains 4 to 16 times greater than this average in the literature.

  • Western Water and California Drought, Part 2: No Need for Malthusian Despair

    September 9, 2014 8:28 AM

    Well, some good news—it’s raining in Los Angeles.

    Western droughts combined with questionable water access policies spawn water crises that unfortunately are not unique to the American west and California in particular.

    Rather, water access issues are globally contentious. A Wall Street Journal book review on the “unhappy descent” of Turkey’s Meander River invoked common laments that: 

    In North America, so much water is taken out of the Colorado that it no longer reaches the sea. Nor does the Rio Grande. Or the River Jordan. Or China’s Yellow River.

    Access to water in times of plenty and in times of drought is a fundamental infrastructure concern worldwide. Further, the issues surrounding innovation and research in water policy are elements of broader science and manufacturing policy.

    Aggravations abound—and so do penalties. One Oregon man catching rainwater on his own property received 30 days in jail for breaking a 1925 law prohibiting personal reservoirs. But when scarcity looms and emotions run high, strange things happen.

    In addition to novelties like rainwater theft prosecution, water policy can be fundamentally perverse and distortionary: water supply systems may not cover their debts, operations and capital replacement needs, and as governmental monopolies, they sometimes “are used as cash cows to support more labor-intensive functions of local government, such as fire and police,” as G. Tracy Meehan has noted.

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