You are here

Vol. VI, No. 24

Cooler Heads Digest


Vol. VI, No. 24



Government Lacks Legal Authority to Award Emissions Credits


On February 14, 2002, President Bush directed the Department of Energy to improve the “accuracy, reliability and verifiability” of a program that allows companies to voluntarily report reductions in greenhouse gas emissions under Section 1605(b) of the Energy Policy Act of 1992.  The President also asked for recommendations on how “to ensure that businesses and individuals that register reductions are not penalized under a future climate policy, and to give transferable credits to companies that can show real emission reductions.”  On May 6, DOE requested public comments on how to modify the program in accordance with the President’s directive.


In response, 80 comments from industry, government, and non-profits were received.  A major issue that has arisen is whether section 1605(b) provides the legal authority necessary for penalty protection or to award emission credits.  The Natural Resources Defense Council, an environmental lobby, and the Northeast States for Coordinated Air Use Management do not think so.  The Electric Power Industry Climate Initiative (EPICI) claims that it does.


Marlo Lewis, senior fellow at the Competitive Enterprise Institute, dismantles EPICI’s legal argument in a new report.  According to Lewis, EPICI’s entire argument is based “on the alleged implications of Senator Joseph Lieberman’s (D-Conn.) floor statement prior to the Senate vote on the 1992 Energy Policy Act, on a semblance of ambiguity in the text, and on Congress’s silence (the absence of express prohibitions against penalty protection and credit for voluntary reductions).”


There is no ambiguity in the text of 1605(b), according to Lewis.  EPICI claims that the statement that a reporting entity may use the greenhouse gas registry to “demonstrate achieved reductions of greenhouse gases,” implies protecting baselines or qualifying for credits.  Clearly, if that were the intent, then “demonstrating” reductions would be necessary, but that does not imply protection or crediting.


Even if the statute were ambiguous, the last place a court would look to clear up the ambiguity would be floor statements made during congressional debates.  Yet that is essentially what EPICI resorts to to make its case.  Lewis contends that EPICI has misinterpreted Lieberman’s statement.  Lieberman argued that 1605(b) would have some of the same effects as a penalty protection program, but nowhere does he imply that it is a penalty protection program.


Moreover, asks Lewis, why did Senator Lieberman and the Clinton administration seek legal authority for penalty protection through credit for early action legislation in the 105th and 106th Congresses if it was already available through 1605(b)?  Because, says Lewis, neither Lieberman nor Clinton interpreted 1605(b) as providing such authority.


Finally, EPICI makes the outlandish argument that the federal government does have the authority since 1605(b) does not prohibit it from providing penalty protection or awarding credits for early emissions reductions.  Lewis notes that their argument boils down to, “DOE may do whatever Congress has not prohibited it from doing,” which turns “the central principle of administrative law on its head.”  The full report can be obtained at


Bush Administration Considers CAFE Increase for SUVs


Officials in the Bush Administration are reviewing a proposal by the National Highway Traffic Safety Administration to raise Corporate Average Fuel Economy standards on sport utility vehicles and light trucks by a half mile per gallon each year for the model years 2005 to 2007.


Some of the impetus for the proposal may be due to the mistaken notion that the U.S. should become energy independent, given the possibility of war with Iraq and the precarious relations with other oil-exporting countries.  Environmental activists, including leftist religious groups, are conducting a major campaign to force automakers to build more fuel-efficient cars.  The “What Would Jesus Drive?” campaign is spearheaded by a group of religious leaders that has managed to secure meetings with executives from General Motors and Ford Motor Co.


John Graham, director of the White House’s Office of Information and Regulatory Affairs, may play a major role in the final decision.  He “sharply criticized the federal fuel-economy program when he was in the private sector, arguing that it encouraged auto makers to produce smaller vehicles that can be more dangerous to occupants in a crash (Wall Street Journal, November 20, 2002).”




Offshore Wind Farm Poses Significant Economic and Environmental Costs


Energy analyst Glenn Schleede has once again exposed the problems with wind power in comments he has submitted to the U.S. Army Corps of Engineers, which is conducting an economic and environmental analysis of a proposed offshore wind farm.


The wind farm proposed by Winergy LLC would be located five miles off the coast of the eastern shore of Virginia.  In a preliminary analysis, the Corps determined that the project would not require an Environmental Impact Statement.  Schleede disagrees, saying that the Corps has “underestimated the potential environmental impact-including onshore impact” of the project.


The wind farm would produce approximately 2.5 billion kWh of electricity per year, assuming a generous 30 percent capacity factor.  The wind turbines themselves would cover 57 square miles of the Atlantic Ocean, yet would produce slightly less electricity than a “new baseload 350 MW gas-fired combined cycle generating unit,” which would “occupy only a few acres.”  Moreover, the amount of electricity produced would only equal approximately 3.3 percent of the total electricity produced in Virginia.


Schleede points out several potential adverse effects that should be mitigated as a condition to awarding any permits, including impacts that would not be limited to the 57 square miles of ocean.  “Feeding such a potentially large (975 MW, at times), highly variable (from 0 to 975 MW), and often unpredictable amount of electricity into an onshore transmission line and electric grid would be a significant burden on existing onshore transmission capacity and the stability of a regional electric system that must be kept in balance (e.g., voltage, frequency).” 


The addition of wind capacity would likely “impair rather than enhance electric system reliability,” says Schleede.  The Corps should also take into account the need for backup generation and transmission capacity as part of the full costs of the wind farm.


The Corps should also have a firm grasp of wind energy economics and especially the role of federal subsidies, says Schleede.  “In some cases, the value of the subsidies may exceed the revenue ‘wind farm’ owners receive from the electricity that they sell.  Schleede estimates that Winergy’s proposed wind farm would receive an annual tax credit of more than $46 million.  The project would also qualify for accelerated depreciation and would be able to write off the entire $900 million in estimated capital costs in 6 years.  Yet the annual revenue from selling electricity would be only a little over $52 million.  Schleede also notes that tax sheltering through accelerated depreciation often leads to early sale or abandonment of wind farms.


Finally, Schleede argues that rather than being environmentally benign, wind farms entail significant environmental costs.  He notes the opposition to wind farms is growing around the world, “often due to the adverse impact of ‘wind farms’ on environmental, ecological, scenic, and property values.”


Stanford Launches Energy Project


On Nov. 20, Stanford University announced the creation of the Global Climate and Energy Project (G-CEP).  The purpose of the project is to “engage in research to develop technologies that foster the development of a global energy system where greenhouse emissions are much lower than today.”  It may also be seen as addressing the challenge posed by the article in the November 1 issue of Science, which we reported in the last issue.


Funding commitments from three major corporations totaling $225 million over the next 10 years were also announced, with several other corporations expected to make additional commitments in the near future.  ExxonMobil, the world’s largest publicly-traded petroleum company, plans to contribute up to $100 million; General Electric, the world leader in power generation technology and services, $50 million; and Schlumberger, a global technology services company, $25 million.  Stanford engineers and scientists will do much of the research, but will be joined by other major institutions in North America, Europe and Asia.


The project was immediately criticized as inadequate, and ExxonMobil’s role was attacked.  “I’m somewhat skeptical, given the history of some of the companies involved in this, that it represents a dramatic change in their resistance to aggressive federal and state policy action on the issue,” said Alden M. Meyer, director of government relations for the Union of Concerned Scientists.

“This could be seen as another effort [by ExxonMobil] to say, ‘We’re doing something, but this is a complex problem that’s going to take decades to solve and, in the meantime, let’s not do anything aggressive with fuel economy standards or anything else that actually reduces oil use today,’” he said (Los Angeles Times, November 21, 2002).


Lee Raymond, chairman of ExxonMobil, responded that, “Our investment in G-CEP is a demonstration of our long-held belief that successful development and global deployment of innovative, commercially viable technology is the only path that can address long-term climate-change risks while preserving and promoting prosperity of the world's economies.”


San Francisco Leaps Into Solar Power


Following a major referendum last year in which San Francisco residents approved a $100 million bond measure to install as many solar panels in the city as the rest of the nation does all year, Mayor Willie Brown announced a $7.4 million project to install solar panels on the roof to the Moscone Convention Center.  “The Moscone Center project itself couldn’t be better.  It is a gem which should make city leaders across the country salivate,” said Brown.  “It would be fiscally irresponsible not to do a project like this” (Associated Press, November 22, 2002). 


The economics of the project don’t look good, however.  The project, which will also include retrofitting for energy efficient fixtures, will save the city a mere $210,000 per year, meaning it will take more than 35 years for the project to “pay for itself (San Francisco Chronicle, November 22, 2002).”  Several other cities are considering following San Francisco’s example.   Brown says that he has heard from 15 other cities that are considering similar programs, including San Diego, Denver and New York (Los Angeles Times, November 22, 2002).




Evaporation Declines Despite Model Predictions


Global warming predictions depend on assumptions about certain “feedback effects.”  The key feedback effect driving predictions of catastrophic global warming has to do with changes in evaporation and concentrations of atmospheric water vapor.  According to the theory, a doubling of carbon dioxide in the atmosphere would raise global temperatures approximately one degree Celsius over the next century.  That small amount of warming, however, would increase evaporation at the surface, raising concentrations of water vapor, a major greenhouse gas, in the atmosphere.  It is this positive feedback effect that would cause the lion’s share of warming, according to the climate models.


A new empirical study in the November 15 issue of Science fails to confirm this feedback hypothesis.  The authors, Michael Roderick and Graham Farquhar with the Cooperative Research Centre for Greenhouse Accounting at the Australian National University in Canberra, found that evaporation in the Northern Hemisphere has actually decreased over the past 50 years.  They refer to this difference between the expected and observed trend in evaporation as the “pan evaporation paradox.”


The authors argue that there really is no paradox, however.  They argue that reduced evaporation is due to “a substantial decline in global solar irradiance as a consequence of increased cloud coverage and/or aerosol concentration.”  Although the authors do present data to support their view that solar irradiance has decreased, they offer no support that it may be caused by increases in aerosol concentrations.  Indeed, there has been a steady decline in aerosol concentrations over the last 50 years.  That aside, the fact that evaporation has decreased while temperatures have apparently increased strikes another blow to the confidence that can be placed in climate models’ predictions.


Pacific Oscillation Drives Climate Change


A new study in the Geophysical Research Letters (October 8, 2002) suggests that long-term changes in Pacific Ocean temperatures may be the key to understanding global climate change.  “Abrupt changes in water temperatures occurring over intervals of up to 25 years suggest that global warming may result as much from natural cyclical variations as from human activity,” said Benjamin Giese, of the College of Geosciences at Texas A&M and a co-author of the study.


“Climate models constructed here at Texas A&M University were used to analyze ocean surface temperature records in the tropical Pacific since 1950,” said Giese.  “The results suggest that as much as one-half of all global surface warming since the 1970s may be part of natural variation as distinct from the result of greenhouse gases.”


Giese noted that over the last 50 years it appears that global surface temperatures have increased about a half degree Celsius, but that the general trend is highly variable.  “How much of this variability is attributable to natural variations and how much is due to anthropogenic contributions to atmospheric greenhouse gases has not yet been resolved,” he said.  “Recent studies indicate that it is difficult to separate intrinsic variance from anthropogenic forcing in the climate system.”


The data on tropical Pacific Ocean temperatures show that long-term increases in ocean temperatures precede changes in global surface air temperatures by about four years.  These changes in ocean temperatures are in turn preceded by seven years by deeper subsurface water temperature changes.  “Thus, the results suggest that much of the decade to decade variations in global air temperature may be attributed to tropical Pacific decadal variability,” said Giese.  “The results also suggest that subsurface temperature anomalies in the southern tropical Pacific can be used as a predictor of decadal variations of global surface temperature.”


An abrupt temperature change in the Pacific Ocean in 1976 preceded a two-tenths of a degree increase in global air temperatures.  Moreover, it now appears that the tropical Pacific Ocean temperature is now shifting back to pre-1976 conditions.  “The subsurface tropical Pacific has shown a distinct cooling trend over the last eight years, so the possibility exists that a warming trend in global surface air temperature observed since the late 1970s may soon weaken,” according to Giese.




·    Taken By Storm: The Troubled Science, Policy and Politics of Global Warming has just been published in Canada by Key Porter Books.  The authors are Ross McKitrick, an economist with the University of Guelph in Ontario and a Cooler Heads Coalition lecturer in 2001, and Christopher Essex, a mathematician at the University of Western Ontario who specializes in the underlying mathematics, physics and computation of complex dynamical processes such as climate.  The authors “explain the science of climate change and show that the widespread belief in global warming is really a house of cards.”  Further information is available at




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

National Center for Policy Analysis

National Center for Public Policy Research

Pacific Research Institute

Seniors Coalition

60 Plus AssociationSmall Business Survival Committee