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Vol. V, No. 10

Cooler Heads Digest


Vol. V, No. 10

Pro-Kyoto Amendment Passes House

On May 16 the U.S. House of Representatives passed the State Department Budget Authorization (H.R. 1646) by a 352 to 73 vote.  Included in the bill was an amendment to urge the Bush Administration to continue its participation in the Kyoto negotiations.  Reportedly, the amendment was added to the bill in the International Relations Committee on May 2 when several Republican congressmen had momentarily left the room.  The amendment passed in committee 23-20 on a nearly party line vote, with Rep. Chris Smith (R-N.J.) being the only Republican to vote for the amendment.

The amendment reads in part: “SENSE OF CONGRESS- It is the sense of the Congress that the United States should demonstrate international leadership and responsibility in mitigating the health, environmental, and economic threats posed by global warming by—

·                     “taking responsible action to ensure significant and meaningful reductions in emissions of carbon dioxide and other greenhouse gases from all sectors; and

·                     “continuing to participate in international negotiations with the objective of completing the rules and guidelines for the Kyoto Protocol in a manner that is consistent with the interests of the

United States and that ensures the environmental integrity of the protocol.”

The amendment wasn’t challenged on the floor of the House, because, according to a committee spokesman, the Bush Administration had indicated that it would continue to participate in future negotiations.  However, since the amendment specifically urges the administration to negotiate “with the objective of completing the rules and guidelines for the Kyoto Protocol,” the House action clearly goes beyond stated administration policy (Greenwire, May 14, 2001). 

Dueling Energy Plans

In an attempt to pre-empt the Bush Administration’s forthcoming energy plan, congressional Democrats have released a plan of their own.  If implemented, it would greatly exacerbate the energy crisis rather than solve it.

The first proposal is to put price controls on wholesale electricity prices by calling on Congress to pass either the Feinstein-Smith bill (S. 764) or the Inslee bill (H.R. 1468) “that will return the West to just and reasonable cost-of-service based rates until March 1, 2003.”  This displays an appalling lack of basic economic understanding.  Price controls invariably lead to shortages because they do nothing to depress demand or increase supply.  They were the cause of gasoline shortages and gas lines in the 1970s.

Other proposals in the Democrat’s plan are similarly ill-conceived and counter-productive.  It has been reported that the Bush Administration’s energy proposals to be released on May 17 will focus on increasing energy production, removing supply bottlenecks created by government regulations, and rebuilding and enlarging America’s energy infrastructure.

Rep. Dick Gephardt (D-Mo.) arrived at the press conference, held at the Capitol Hill Exxon gas station, to unveil the Democratic energy plan in a large SUV.  When asked about Gephardt’s apparent hypocrisy, his spokesman Eric Smith said with a straight face, “We don’t say anything about changing people’s lifestyles” (New York Post, May 16, 2001).  To the contrary, their plan is all about government forcing people to change their lifestyles.

Rio Tinto Goes Pew

The Pew Center on Global Climate Change announced on May 15 that Rio Tinto has joined its Business Environmental Leadership Council.  London-based Rio Tinto is one of the world’s largest multi-national mining conglomerates.  It is also a major coal producer.

Rio Tinto is the first mining company to join the Pew Center’s Council.  The Pew Center is a leading industry-front group, now comprised of 33 corporations that hope to profit from higher energy prices.  The Pew Center was founded in 1998 and is largely funded by the Pew Charitable Trusts, which was based on the Pew family’s Sun Oil Company fortune.

Other corporate members of the Pew Center are: ABB; Air Products and Chemicals, Alcoa; American Electric Power; Baxter International; Boeing; BP (Beyond Petroleum); California Portland Cement Co.; CH2MHILL; Cummins Inc.; DTE Energy; DuPont; Enron; Entergy; Georgia-Pacific; Holnam; IBM; Intel; Interface Inc.; Lockheed Martin; Maytag; Ontario Power Generation; PG&E Corporation; Rohm and Haas; Royal Dutch/Shell; Sunoco; Toyota; TransAlta Corp.; United Technologies; Weyerhaeuser; Whirlpool and Wisconsin Energy Corporation.

In Praise of “Green” Industry

Several articles have recently appeared praising those industries that are positioning themselves for what they believe to be the inevitable regulation of CO2 emissions.  The Wall Street Journal (May 10, 2001), the New York Times (May 15, 2001), and Business Week (May 14, 2001), have all taken the view that industry should go ahead with CO2 reductions even if President Bush won’t.

Business Week advised business CEOs to “explain [to President Bush] that globalization is the most powerful force acting on all governments, economies, and societies, and that an international strategy must be based on ramping up economic engagement,” and that, “We need better arrangements for environmental protection and social safety nets to cushion change.”    Presumably, the president should agree to cut carbon dioxide emissions, even though there is no plausible justification for such action, in the name of globalization.

The Wall Street Journal, in an article titled “Utilities May Be Greener Than Bush,” argued that, “A substantial segment of the electric-utility industry was almost as disappointed [as environmentalists]” over President Bush’s decision to not regulate their emissions of CO2.  “Sensible, farsighted utility executives look at the world as it is, no as they wish it to be,” opined the Journal.  The Journal quotes Exelon Corp.’s chief executive John Rowe as saying, “There’s mandatory carbon capping in the long-term future,” and calls him a “realist.”

But what exactly does the Journal expect these utility executives to say?  The utility industry is a government-protected monopoly that has never had to operate in a competitive environment.  As the Journal pointed out, “Not so long ago, regulated utilities saw environmental rules as a nuisance but not a threat to profits.  Every extra dollar spent on pollution-control gear increased the value of the asset base that regulators use to set electric rates.”  More regulation meant higher rates and more profits for utilities.

“Utility executives fear, with some reason,” said the Journal, “that they will spend heavily on an old coal plant to reduce sulfur, nitrogen and mercury emissions, and then be forced to shut it anyhow because new limits on CO2 arrive.”  But begging to be regulated now won’t create a stable regulatory climate. It will only embolden regulators to impose even heavier regulation in the future.

James DeLong, a Senior Fellow at the Competitive Enterprise Institute, noted the profit motive behind the utility industry’s support for CO2 regulation on  Some have bet billions of dollars on a rapidly diminishing global warming threat giving them a vested interest in regulation, said DeLong.  Moreover, “A cap and trade system would be a bonanza for utilities that derive their power from non-coal sources because they would then get the equivalent of a royalty on every kilowatt hour produced by coal-fired plants.”

Levy Imposes Heavy Burden

The United Kingdom’s climate change levy is starting to take a heavy toll on manufacturers in the country.  According to London’s Times (May 15, 2001), it has “more than tripled the pace of cost increases in Britain’s industry after its introduction last month, official estimates have revealed.”