Tuesday, November 11, 2008

Bush the Cooler

This question by Andy McCarthy in the context of President-Elect Obama's bizarre formulation about his proposed tax hikes - if your plan is really the way forward, why would you delay it in the face of that from which it is supposed to rescue us? - applies perfectly to the new fad phrase of "green jobs" (code for subsidies, mandates and taxes to pay for them which only weeks ago were still defended as not as costly as everyone's saying and only need the subsidies for another decade or so to be competitive).

In the context of Europe's current brake-slamming on the economic pain caused by green policies, it's the same point that I had planned to make during a 30-minute Powerpoint show on Saturday for the International Association of Political Consultants - except my half-hour turned into 15 minutes, with no visual aids allowed. [I appeared on a panel with former Shell CEO John Hoffmeister and a greenie who was Central-Casting-perfect. His fact-free, gloomsday ramble included frogs boiling and civilization marching off a cliff.]

Given this unanticipated format change, I was unable to make all my points. The one I did most enjoy offering to this mostly foreign, largely European audience interested in "the politics of global warming" was that we are on track to see the global temperatures having cooled by the day George W. Bush leaves office compared to when he entered.

You've just gotta love that. In fact, if you do, today's your lucky day: Red Hot Lies: How Global Warming Alarmists Use Threats, Fraud, and Deception to Keep You Misinformed is available for shipment! Order today and you can have it by Wednesday, the tenth anniversary of Bill Clinton signing a Kyoto Protocol with no hope of Senate ratification so that George W. Bush could be accused of arrogantly refusing to sign it.


Snow arrives early at Snowbird, Utah

Snowbird marks its second-earliest start in 38 years

Tuesday's snowstorm kicked off a five-day accumulation that has reached about 46 inches of snow, allowing Snowbird Ski Resort to open Friday, the second-earliest start in the resort's 38-year history. The resort didn't open until Nov. 28 last year. "It feels fantastic to be out this early. I forgot how it felt to be out here," said Plummer, who was at the resort with his son and some friends. "It's pretty good skiing. There's some rocks showing through, but I'm not picky. I'm hoping this means a long and epic season". Snowbird is the only resort open so far, giving skiers and snowboarders a head start on the season. Most resorts typically open after Thanksgiving.

Even though the runs and lifts are limited, Ben Hauber has been out every day since Friday and hasn't gotten bored yet. It is the Pittsburgh native's first ski season since moving to Utah. "According to my friends, it's a bad day, but this [would be considered] a great day back home," Hauber said. "The first day was awesome. All I plan on doing is working and being here [at Snowbird]."

Snowbird does not release figures but Public Relations Director Jared Ishkanian said the resort has seen a steady flow of skiers and snowboarders. The tram, which accommodates 125 people per trip, has been consistently about 80 percent full on each of the three days since the resort opened for the season.

Ishkanian is hoping the early start is a good omen for the rest of the season. "By getting an early start, it helps us with word of mouth and gives us good publicity," Ishkanian said. "If people have snow in their backyards in the valley, it shifts their mind-set from fall to winter. They think of snow and they think of skiing. The economy is a factor this year, but in our experience, if we get snow early and often, it goes a long way in assuring a positive experience.''



It's been known as ignorance since Bastiat's "Petition of the candlemakers" in the 19th century

It would indeed create jobs, but it would do so by killing other jobs. Is that really what Americans want? President-elect Barack Obama has put energy policy at the forefront of his agenda. He says that his plan will boost our national security, help us achieve "energy independence," reduce greenhouse gas emissions, and promote job creation. Indeed, Obama vows to create around five million new jobs by increasing federal spending on renewable energy sources such as wind, solar, and biofuels.

As many experts have observed, the science behind the Obama plan is dubious, particularly when it comes to ethanol. The renewable energy industry simply does not have the capacity (at least not yet) to power large swathes of our fossil fuel-driven economy. Just look at the United Kingdom, where a shortage of windmill-building capability has hindered the government's plan to replace aging nuclear reactors with wind power.

If Obama's energy promises rely on questionable science, they rely on even more questionable economics. We are to believe that replacing conventional energy sources (especially coal) with renewables (especially wind) will create five million new "green jobs." The hope is that armies of workers will be enlisted to build tens of thousands of windmills; to manufacture and deploy solar-power installations; to harvest, transport, and process huge amounts of biofuel feedstock; and to string the power lines that will allow the U.S. power grid to incorporate a major expansion of intermittent energy.

The idea of government 'job creation' is a classic example of the broken window fallacy, which was explained by French economist Frederic Bastiat way back in 1850. It is discouraging to think that, nearly 160 years later, politicians still do not understand Bastiat's basic economic insight. He explained the fallacy as follows:

Imagine some shopkeepers get their windows broken by a rock-throwing child. At first, people sympathize with the shopkeepers, until someone claims that the broken windows really aren't that bad. After all, they "create work" for the glassmaker, who might then be able to buy more food, benefiting the grocer, or buy more clothes, benefiting the tailor. If enough windows are broken, the glassmaker might even hire an assistant, creating a job.

Did the child therefore do a public service by breaking the windows? No. We must also consider what the shopkeepers would have done with the money they used to fix their windows had those windows not been broken. Most likely, the shopkeepers would have ploughed that money into their store: perhaps they would have bought more stock from their suppliers, or maybe they would have hired new employees. Before the windows broke, the shopkeepers had intact windows and the money to purchase more goods or hire new workers. After the windows broke, they had to use that money to repair the windows, and thus were unable to expand their business.

Now consider Obama's "green jobs" plan, which includes regulations, subsidies, and renewable-power mandates. The "broken windows" in this case would be lost jobs and lost capital in the coal, oil, gas, nuclear, and automobile industries. These industries currently employ more than one million people directly. Conventional power plants would be closed and massive amounts of energy infrastructure would be dismantled. After breaking these windows, the Obama plan would then create new jobs in the renewable energy sector. The costs of replacing those windows would ultimately be passed on to taxpayers and energy consumers.

In short, the Obama plan reflects fallacious thinking of the first order. There may be sound reasons to switch from existing energy sources to renewables, including the need to slash greenhouse gas emissions, the need to reduce our dependence on Middle Eastern oil, and the need to meet growing energy demand. If Americans wish to pay for a wholesale transformation of the energy industry, that is their choice. But let's not lie about the costs, and let's not espouse an economic fallacy that is nearly 160 years old. Obama's "green jobs" plan would indeed create jobs, but it would do so by killing other jobs. Is that really the type of energy policy Americans want?


Obama's Climate Change Trap

Last Friday, House of Representatives Republicans released a little-noticed report outlining their priorities on future climate change and energy policy. "An energy policy that does not address all facets of energy production is a failure and threatens our economy, our national security and the environment," Reps. Tom Davis, R-Va., and Darrell Issa, R-Calif., said in a press release announcing the release of the report. They might as well have written a ransom note.

Obama's plans to finance an ambitious clean energy agenda by imposing a de facto carbon-emissions tax in the form of an auction-based cap-and-trade system has set the stage for an epic showdown on Capitol Hill over carbon emissions and energy legislation. The outcome will likely shape energy and environmental policies for decades.

But it also has the potential to derail the new president's larger agenda, as campaign promises, fiscal realities and industry pressure collide--a scenario that swamped the early days of the Clinton administration's work on health care. "If Obama wins the election," a report by Stanford Financial Group predicted in August, "he will face pressure to be very aggressive on strict limits and auctions and could find himself in the unenviable position of having his climate change effort become his 'Hillary Care.' "

Under a cap-and-trade system, a regulatory body allocates CO2 emission allowances to companies, typically by way of auction, but sometimes for no cost. Each allowance represents the right to emit one ton of CO2 or CO2-equivalent GHG. The total allowances distributed to a company represent the total emissions that it can produce in any given year without penalty. Companies that emit less than their allowances permit, or can reduce emissions more cheaply than their peers, can either bank their surplus allowances for future years or can sell them to companies whose emissions exceed their own allowances.

In Europe's cap-and-trade scheme, the European Union allocated emissions allowances for free to emitters of carbon dioxide or other greenhouse gases. The bulk of the value of these grants has accrued to the owners of the emitting facilities, according to multiple analyses. In particular, European power generators factored the secondary market value of their allowance grants into their production costs--leading to significant increases in European power prices and profits.

If the U.S. also allocates allowances for free, unregulated power, generators will likely pass through the value of allowances consumed to wholesale power prices. In other words, cap and trade would be a boon for carbon-intensive electricity producers--at least those located in unregulated electricity markets--because they raise rates to reflect the market value of those allowances.

"Regulated utilities will reposition their cash outlays so that they will recover their costs by raising rates," said Hugh Wynne, a senior research analyst at Sanford C. Bernstein. "Unregulated utilities will pass through the costs by raising the prices they charge in wholesale markets."

While Obama and McCain both supported cap-and-trade legislation, they proposed two very different systems. Obama's version would make electricity producers buy emissions allowances, and McCain's version would have given them allowances free. These systems may lead to similar carbon emissions cuts, but they also lead to wildly different economic outcomes.

"It doesn't matter whether emissions allowances are auctioned or given away freely," said Michael Wara, an assistant professor of law at Stanford Law School. "Both approaches ultimately have the same impact on cutting carbon emissions.

Generally speaking, they also have the same impact on the broader economy. The only difference is who ends up with the money. We're creating a huge asset class and different constituencies have different claims to it. Who gets the goodies? This question will drive the politics far more than the size of emissions cuts. Only legislation that answers this question in a way to the satisfaction of the stakeholders has any real chance of passing."

McCain's system would have given unregulated power generators a windfall profit. Although power generators would receive allowances with no offsetting cost, unregulated generators could still demand higher prices because of those allowances, which would increase profits materially. In particular, Dynegy, DPL, Reliant, NRG, Exelon and FirstEnergy would have seen profits rise under this system, according to a report by Bernstein Global Wealth Management.

On the other hand, an auction-based cap-and-trade system would require power generators to buy allowances from the government. This would drive up electricity prices for consumers, especially in coal-fired regions like the Midwest and Southeast. Meanwhile, an auction-based approach would be a boom to renewable energy projects like wind, solar and geothermal, which would not need to buy carbon allowances. "If coal-fired plants and natural gas plants are selling electricity in the same market, coal producers will have to buy twice the number of allowances as natural gas plants," said Wynne. "It may not put them out of business, but it will squeeze their margins and reduce their profitability."

Obama campaigned on a platform that championed an exclusively auction-based cap-and-trade system. While campaign promises seldom translate perfectly into post-election agendas, this particular campaign promise could seem especially less palatable now. If producers had to pay $25 for every metric ton of carbon they emitted, rates would need to rise anywhere from 23% to 43% at coal-fired utilities in the Midwest and 15% to 29% at coal-fired utilities in the Southeast to offset the costs of emissions allowances, according to a recent analysis by Bernstein Research.

In different circumstances, Obama could ease the hike in electricity prices in particularly sensitive areas like Appalachia, which has a higher concentration of low-income households and coal fired plants than other regions, by mixing auctions and allowances as needed. But doing so could undercut an equally important campaign promise to ramp up spending on energy research and development, especially since the Wall Street bailout depleted government coffers, and a slowing economy reduced tax revenues.

The result: The Republican minority in Congress has ample fodder to fight the full implementation of Obama's clean energy and carbon emissions cuts agenda. If Democrats push the agenda too aggressively, they risk provoking a political backlash. Welcome to the White House, Mr. President.



From California to Missouri, four of five environmental initiatives lost at the ballot box. Voters are clearly still not ready for exorbitant costs and excessive regulation without clear benefits

President-elect Obama may have felt "a righteous wind" at his back during the campaign, but it did not translate into environmental victories at the ballot box, where one green initiative after another failed for a variety of reasons.

California voters shot down both clean-energy propositions on the ballot. Proposition 7 would have required utilities to generate 40% of their power from renewable energy by 2020 and 50% by 2025. It lost 65% to 35%. Proposition 10 would have created $5 billion in general obligation bonds to help consumers and others purchase certain high-fuel-economy or alternative-fuel vehicles, and to fund research into alternative fuel technology. It failed 60% to 40%. Even in San Francisco, the capital of liberalism and greenie fervor, voters rejected Proposition H, which would have mandated a rapid increase in the city's use of clean energy to achieve its goal of being 100% renewable by 2040. It would also have meant taking over the city's private electric company.

Obama took the former red state of Colorado, which also elected environmentalist Senate candidate Mark Udall over oil executive Bob Shaffer. Yet Coloradans struck down a measure to pay for conservation and clean energy by increasing taxes on oil companies. Only in Missouri did green energy score a victory. There, Proposition C mandated a 15% increase in renewable energy by 2021 with slow and steady yearly increases that energy companies felt they could phase in without disruption and with which voters felt more comfortable.

The mantra is that oil and car companies are blocking the increased use of renewable energy. The truth is that consumers, through their choices and their votes, are slowing the stampede. They worry about the cost in tough economic times and whether such efforts are worth it based on dubious evidence of global warming. Energy independence is one thing, but going bankrupt to achieve it is quite another.

When gasoline prices were over $4 a gallon, the chant "drill baby drill" grew loud enough that Democrats were forced to back off renewing a ban on offshore drilling. Now in complete control, they can block offshore drilling, nuclear power and shale oil in their Ahab-like pursuit of alternative energy.

Texas consumers are finding out how expensive the pursuit of alternative energy can be. Their state generates more electricity from wind than any other, and people like oil legend T. Boone Pickens want to generate more. A just published study by the Texas Public Policy Foundation, "Texas Wind Energy: Past, Present and Future," says that to achieve even modest amounts of wind energy would cost rate payers and taxpayers at least $60 billion through 2025. That includes transmission costs, production costs, subsidies, tax breaks, economic disruption costs and grid-management costs.

Because of the intermittent nature of wind, the Electric Reliability Council of Texas uses a figure of only 8.7% of wind power's installed capacity when determining available power during peak periods. On cloudy and windless days, solar and wind are useless and require conventional power sources as backup. Output is not steady and cannot be increased on demand. You can't make the sun shine brighter or the wind blow harder during peak periods.

A Feb. 27 Reuters story illustrated the point. Headlined "Loss Of Wind Causes Texas Power Grid Emergency," it told of an electric grid operator forced to curtail 1,100 megawatts of power to customers on just 10 minutes' notice. The wind simply stopped blowing.

Wind turbines generally operate at only 20% efficiency compared with 85% for coal, gas and nuclear plants. A single 1,000-megawatt nuclear power plant would generate more dependable power than 2,800 1.5-megawatt, occasionally operating wind turbines sitting on 175,000 acres.

Nuclear power is clean energy, and you wouldn't have to wait for a sunny or windy day to plug in your electric car.



In the video below, a member of the new government criticizes existing NZ climate policy. You have to get past about 1m of ads to get to it but it is worth watching.

Background to the video here

New Zealanders chose a wealthy, conservative former financier Saturday to help navigate the country through the global financial meltdown, handing long-serving left-wing Prime Minister Helen Clark a crushing election defeat.

John Key, the 47-year-old leader of the conservative National Party, swept easily to power in this South Pacific country of 4.1 million people, ousting Clark's Labour Party after nine years in office.

Key has promised a more right-leaning government than Clark's, which for almost a decade made global warming a key policy issue.

In a country where the environment is a mainstream political issue, Key has vowed to wind back Clark's greenhouse gas emission trading scheme to protect businesses from financial losses, and to reduce red tape he says entangle important dam projects.

More here


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