Wednesday, February 16, 2022

Climate grant illustrates growth in philanthropy-funded news

Morano comments: The media’s coverage of climate change has sunk to a new journalistic low. The Associated Press declared on February 15, 2022, that it is no longer “wary” of accepting millions of dollars in outside group money to expand the news company’s climate change coverage. The mainstream media, led by the Associated Press, is now publicly admitting they are just phoning in their coverage on ‘climate change.’ Led by the Rockefeller Foundation and others, the AP will be parroting what the ideological activist groups’ funding pays for, while actual news will be tossed aside.

The Associated Press said Tuesday that it is assigning more than two dozen journalists across the world to cover climate issues, in the news organization’s largest single expansion paid for through philanthropic grants.

The announcement illustrates how philanthropy has swiftly become an important new funding source for journalism — at the AP and elsewhere — at a time when the industry’s financial outlook has been otherwise bleak.

The AP’s new team, with journalists based in Africa, Brazil, India and the United States, will focus on climate change’s impact on agriculture, migration, urban planning, the economy, culture and other areas. Data, text and visual journalists are included, along with the capacity to collaborate with other newsrooms, said Julie Pace, senior vice president and executive editor.

“This far-reaching initiative will transform how we cover the climate story,” Pace said.

The grant is for more than $8 million over three years, and about 20 of the climate journalists will be new hires. The AP has appointed Peter Prengaman as its climate and environment news director to lead the team.


US judge strikes down Biden climate damage cost estimate

Neither the WaPo nor NYTimes have reported yesterday's federal court decision dealing a major blow to the Biden climate agenda. "Social cost of carbon" shot down in flames

A federal judge on Friday blocked the Biden administration’s attempt to put greater emphasis on potential damage from greenhouse gas emissions when creating rules for polluting industries.

U.S. District Judge James Cain of the Western District of Louisiana sided with Republican attorneys general from energy producing states who said the administration’s action to raise the cost estimate of carbon emissions threatened to drive up energy costs while decreasing state revenues from energy production.

The judge issued an injunction that bars the Biden administration from using the higher cost estimate, which puts a dollar value on damages caused by every additional ton of greenhouse gases emitted into the atmosphere.

President Joe Biden on his first day in office restored the climate cost estimate to about $51 per ton of carbon dioxide emissions after the Trump administration had reduced the figure to about $7 or less per ton. Former President Donald Trump’s estimate included only damages felt in the U.S. versus the global damages captured in higher estimates that were previously used under the Obama administration.

The estimate would be used to shape future rules for oil and gas drilling, automobiles, and other industries. Using a higher cost estimate would help justify reductions in planet-warming emissions, by making the benefits more likely to outweigh the expenses of complying with new rules.

Known as the social cost of carbon, the damage figure uses economic models to capture impacts from rising sea levels, recurring droughts and other consequences of climate change. The $51 estimate was first established in 2016 and used to justify major rules such as the Clean Power Plan — former President Barack Obama’s signature effort to address climate change by tightening emissions standards from coal-fired power plants — and separate rules imposing tougher vehicle emission standards.

The Supreme Court blocked the Clean Power Plan before it ever took effect, and a more lenient rule imposed by the Trump administration was later thrown out by a federal appeals court.

The carbon cost estimate had not yet been used very much under Biden, but is being considered in a pending environmental review of oil and gas lease sales in western states.

In Friday’s ruling, Cain wrote that using the climate damage figure in oil and gas lease reviews would “artificially increase the cost estimates of lease sales” and cause direct harm to energy producing states.

Economist Michael Greenstone, who helped establish the social cost of carbon while working in the Obama administration, said if the ruling stands, it would signal the U.S. is again unwilling to confront climate change.

“The social cost of carbon guides the stringency of climate policy,” said the University of Chicago professor. “Setting it to near-zero Trump administration levels effectively removes all the teeth from climate regulations.”

Republican attorneys general led by Louisiana’s Jeff Landry said the Biden administration’s revival of the higher estimate was illegal and exceeded its authority by basing the figure on global considerations. The other states whose officials sued are Alabama, Florida, Georgia, Kentucky, Mississippi, South Dakota, Texas, West Virginia and Wyoming.

Landry’s office issued a statement calling Cain’s ruling “a major win for nearly every aspect of Louisiana’s economy and culture.”

“Biden’s executive order was an attempt by the government to take over and tax the people based on winners and losers chosen by the government,” the statement said.

The White House referred questions to the Justice Department, which declined to comment.

Federal officials began developing climate damage cost estimates more than a decade ago after environmentalists successfully sued the government for not taking greenhouse gas emissions into account when setting vehicle mileage standards, said Max Sarinsky, a professor at the New York University School of Law.

Not fully accounting for carbon damages would skew any cost-benefit analysis of a proposed rule in favor of industry, he said, adding that the social cost of carbon had been “instrumental” in allowing agencies to accurately judge how their rules affect the climate.

“Without a proper valuation of climate impact, it would complicate agencies’ good faith efforts to make reasoned conclusions,” Sarinsky said.

A federal judge in Missouri last year had sided with the administration in a similar challenge from another group of Republican states. In that case, the judge said the Republicans lacked standing to bring their lawsuit because they had yet to suffer any harm under Biden’s order.

Friday’s ruling by Cain, a Trump appointee, follows a ruling by another Louisiana judge last summer that struck down a separate Biden attempt to address greenhouse gas emissions by suspending new oil and gas leases on federal lands and water. The judge in that case, U.S. District Judge Terry Doughty, is also a Trump appointee.

In a sign of the shifting politics on the issue, a federal judge in Washington rejected a lease sale in the Gulf of Mexico conducted largely in response to Doughty’s ruling.

U.S. District Judge Rudolph Contreras, an Obama appointee, threw out the lease sale, saying the administration did not adequately take into account its effect on greenhouse gas emissions.


Climate Tyrants' New Tactics

Chief Justice John Marshall’s observation, “[t]hat the power to tax involves the power to destroy,” has become part of American political lore. Marshall understood that the state’s revenue-extracting power can be weaponized—even against those who have committed no crime. We are now seeing a corollary to that notion in finance, with fossil fuel companies as the target. It turns out the government may not need to tax your company into oblivion if it can isolate you from all sources of commercial financing.

It has become an article of faith among climate activists that it is not enough for ethical investors to voluntarily divest themselves from hydrocarbon holdings. Governments and central banks must intervene in capital markets to eventually drive such companies out of business. This strategy is not new—previous generations of activists sought to restrict capital to firms that produce military hardware, nuclear power, cigarettes, firearms, and other politically disfavored products. But never before has government policy so forcefully been part of the plan.

In that spirit, the Senate Banking Committee held a hearing last year, titled “Protecting the Financial System from Risks Associated with Climate Change,” where members of the committee and witnesses were asked what the Federal Reserve was doing to save our planet from hydrocarbon-fueled climate disaster. One witness invited by the committee’s minority, however, had a different view. Economist John Cochrane of the Hoover Institution pushed back on the hearing’s premise that the federal government needs to be “protecting the financial system” from climate risks, suggesting that what climate policy advocates actually had in mind was to “steer funds to fashionable but unprofitable investments and away from unfashionable ones” via “regulatory subterfuge rather than above-board legislation or transparent environmental agency rule-making.”

Many policies favored by climate activists are out of line with prudent policymaking. Worse, they may arrogate entirely new powers to the agencies involved. In his congressional testimony, Cochrane pointed out that the Network of Central Banks and Supervisors for Greening the Financial System—which the Federal Reserve recently joined—has a stated goal to “mobilize mainstream finance to support the transition toward a sustainable economy.” But that is not how finance regulation works. Agencies like the Fed don’t get to pick the policy goals that their leadership happens to like, pressuring private parties to immanentize those outcomes. The Fed has a specific statutory mandate regarding unemployment and inflation—it does not have plenary authority over the entire U.S. economy.

Fortunately, more people are recognizing that the Fed is about to get dangerously out of its depth on climate policy. For instance, in November, Joshua Kleinfeld of Northwestern Pritzker School of Law and Christina Parajon Skinner of Wharton wrote in National Review of the effort to transform the Federal Reserve into a climate regulator: “It is democratically illegitimate for the Fed to engage in freelance activism. The Fed has no legal right to do so.” In a 2021 Vanderbilt Law Review article, Skinner pointed out that the allegedly pressing nature of a societal problem doesn’t magically expand the legal powers of a given government entity. She explained, “despite the substantive importance of climate change, the U.S. Federal Reserve presently has relatively limited legal authority to address that problem head-on,” concluding that “many aspects of climate change sit outside the Fed’s legal remit today.”

It would be a mistake in any case for the Federal Reserve Act to bestow on the Fed the expansive powers some think it needs to address climate change. The American Enterprise Institute’s Ben Zycher has discussed this in detail, emphasizing that the expertise one would need to do this prudently is entirely lacking at the Federal Reserve—and other agencies. Moreover, this problem could not be solved by convening a conference of professionals with doctorates in atmospheric physics. The uncertainties inherent in multi-decade climatological forecasts are not amenable to the supposed financial risk mitigation strategies that proponents want the Fed to employ.

Policymakers would be called on to make assumptions, not just about greenhouse gas levels or changes in the global energy mix, but also about detailed—and contested—scientific issues like the dynamics of cloud formation and regional climate oscillations. How will a given content of aerosols in the upper atmosphere combine with a La Niña event 20 years from now, to influence the value of corporate bonds sold to finance energy infrastructure five years ago? Will warmer winters and melting permafrost in Siberia threaten Citibank’s balance sheet? Will the greening effect of more carbon dioxide in the atmosphere benefit developing nations by helping increase food production? No one knows for sure, but banks are already being pressured to cancel loans based on the assumptions of a handful of non-expert regulators.

Just because climate change is the hottest topic in progressive policy circles today doesn’t mean that other issues won’t command similar attention in the future, as anti-nuclear and anti-firearms campaigns have in the past.

Advocates of climate finance regulation might retort that they don’t need to be sure about things like the average air temperature on Earth in 2100. We already face more immediate risks that will affect the economy and banks’ solvency. Therefore, regulatory institutions like the Federal Reserve should attempt to steer capital flows away from carbon-intensive investments to deal with those immediate risks. That’s true—but only because climate activists themselves have intentionally created and amplified those risks.

When the Securities and Exchange Commission (SEC) issued its first guidance on how public companies should disclose potential climate-related risks in 2010, it identified four sets of circumstances under which firms might be expected to have a disclosure requirement. They were 1) the impact of legislation and regulation, 2) the impact of treaties, 3) the “indirect consequences of regulation or business trends,” and 4) the physical impacts of climate change. In other words, any actual changes to weather patterns, sea levels, or natural disasters were an afterthought to the real financial threat to shareholders: government policy aimed at intentionally sabotaging hydrocarbon energy investments.

Thus, climate activists have managed to work both ends of the field. They publicly attack companies for being involved with oil and gas production, lobby for punitive policies to disadvantage those companies, and then turn around and label those efforts as a “climate risk” that corporations must disclose—and be further targeted by government policy. None of this has anything to do with climate change itself. No stakeholders are being saved from hurricanes or floods by any of this activity. It is a purely political attack on a legal industry that produces the vast majority of the energy that powers the United States and the world. Yet the proponents of this strategy claim that they are “protecting shareholder value” and reducing financial risks to investors. As my Competitive Enterprise Institute colleague Marlo Lewis recently wrote, the real point of all of this is not to identify banks’ climate risks but to intensify fossil fuel companies’ legal and political risks. It’s a self-fulfilling shell game.

This all leads observers to wonder which other industries will see similar attacks in the future. Just because climate change is the hottest topic in progressive policy circles today doesn’t mean that other issues won’t command similar attention in the future, as anti-nuclear and anti-firearms campaigns have in the past.

Unfortunately, we need not even make the case for a slippery slope; federal officials have already done exactly the same thing to other industries. In the mid-2010s, the Obama administration undertook a coordinated enforcement effort called “Operation Choke Point” to delegitimize and de-bank legal businesses that the administration had deemed politically incorrect, choking off their access to capital and financial services. Under the guise of protecting banks from the reputational risk of being associated with unsavory clients, federal officials warned banks that they should reconsider doing business with companies that offered everything from dating services and collectible coins to firearms and payday loans. Not surprisingly, many firms in such a heavily regulated industry took the hint and dropped those suddenly-controversial clients.

When the details of Operation Choke Point became widely known, it met widespread public blowback and was eventually discontinued. But the fact that senior officials within the Department of Justice, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) all thought this was a reasonable approach to enforcement is alarming. It also raises the question: Why did they go about it in such a non-transparent way? If the businesses in question were so problematic, why not simply pass new laws that disciplined them for their alleged transgressions?

The answer, of course, is that any such public effort would have been unpopular and very unlikely to be approved by Congress. Most Americans don’t think that the small businesses targeted by Operation Choke Point should be exiled from polite society–but the progressive-left bureaucrats in the Obama administration did. Moreover, if Congress had decided to criminalize certain previously legal financial transactions, payday lenders and gun stores would have been entitled to due process in an Article III court. But that is not what the Choke Point architects wanted. They preferred a system of vague and unaccountable “regulatory dark matter,” whereby government lawyers threaten private parties with enforcement actions via guidance documents, letters, and blog posts. It is easier to pressure a regulated firm to cut off another business from services than it is to prove in a court of law that the business in question has actually done anything wrong. The effort to expel oil and gas producers from the financial system is following a similar playbook.

Finally, we must consider the long-term political impact of financial agencies like the Fed, SEC, FDIC, and OCC expanding their portfolios to include topics like climate change and risks like those targeted by Operation Choke Point. As University of Alabama law professor Julia Hill wrote in the Georgia Law Review in 2020, “because reputation risk is largely subjective, regulators can use it to further political agendas apart from bank safety and soundness.” That politicization, she goes on, “undermines faith in the regulatory system and correspondingly erodes trust in banks.” Brian Knight of the Mercatus Center has warned about turning financial agencies into “universal regulators,” noting that it is “dangerous for our system of government to have administrative agencies, rather than our elected representatives in Congress, setting policies to address important social problems.”

Leadership at these agencies can step back from the brink and confine their enforcement to the powers actually granted by Congress, but if they do not, a future Congress will need to nudge them back into their corners.

Furthermore, financial regulators’ freelance initiatives on social and environmental policy might not survive a federal court challenge. Consider a similar recent case of agency overreach. Last July, the Supreme Court struck down the Centers for Disease Control and Prevention’s (CDC) eviction moratorium, with the majority writing, “It strains credulity to believe that this statute grants the CDC the sweeping authority that it asserts,” and adding that, “If a federally imposed eviction moratorium is to continue, Congress must specifically authorize it.” Would-be climate finance czars might hear similar admonishments soon.


Renewables revolution is revolting

For decades consumers have been promised renewable energy that will be greener, cheaper and more reliable than the power delivered by the derided fossil-fuel generators. Instead, after billions if not trillions of dollars investment in the likes of wind farms and solar panels, consumers worldwide find they must pay much higher energy bills in return for a service that is far less reliable – all for a reduction in emissions that can have no appreciable effect on climate.

A major case in point is the vast increase in the number of times the Australian National Energy Market Operator (AEMO) is being forced to intervene in generator operations, to ensure stability of the east coast grid. In a submission to the Australian Energy Regulator on a focus paper on Wholesale Market Performance Monitoring late last year, the Australian Energy Council (AEC) notes that before 2017 the AEMO rarely issued what are known as intervention orders.

The AEC, which represents the biggest operators in the energy market, says that now these orders are almost commonplace and have become seemingly the default way of managing the market. These orders may involve directing a gas generator to remain in the market, or a diesel generator to continue operating because the AEMO has realised that there is not enough reserve capacity. The safety net if something goes wrong has become too thin, and more firm generation has to be made available.

Although the AEC does not say so, the cause of this instability is the shift away from reliable coal-fired generations towards weather-dependent renewable energy, particularly in the wind farm capital state of South Australia which is the subject of many of the notices, not to mention a number of wholesale price spikes in excess of $5,000 a megawatt hour. Instead, understandably, the AEC’s focus is on the cost of all these interventions, and that no one seems to be ensuring that the underlying problem is fixed through commercial arrangements – that is by power providers being paid to make additional firm power generation available when required.

As matters stand, Australian consumers may be in a bad way when it comes to paying for energy, but at least their lot has improved in recent years. A graph in the annual retail markets report produced by the Australian Competition and Consumer Commission for 2020-21 shows that power prices spiked in 2018 at about 80 per cent plus above 2005 prices in real terms. At last count they were about 60 per cent or so above 2005 prices, which is better but still far above the 20 per cent increase in real incomes over the same period, with much of the recent reduction being due to a surge in investment in networks working its way through the system.

The increasing level of intermittent renewables on the system – an AEMO interactive site shows that about three per cent of power came from solar in the past 12 months and ten per cent from wind – has certainly not reduced consumer bills, despite the blather from activists. But they also have not added much to costs directly. The main effect of renewables in Australia has been to help drive the old, efficient, reliable brown coal plants out of business. The closure of so much reliable capacity has driven up wholesale power prices.

However, the Australian experience with power prices remains rosy compared with that of European consumers, particular when much colder winter temperatures mean that consumers have to pay higher energy bills or freeze in their own homes.

In the UK, a price cap on power bills has shielded consumers from the worst of a spike in wholesale prices, although that cap has been still set high enough for them to complain bitterly. Another major effect of the cap has been to push a lot of smaller power suppliers out of business, as they are unable to pass on price increases to consumers. The price cap is expected to be increased by perhaps 50 per cent in the northern spring.

This European-wide spike in wholesale electricity prices increasing consumer distress is, in turn, the result of Russia putting Europe low on the list of customers for its gas – and the gas that does make it through the connecting pipelines will vanish if Russia invades the Ukraine. However, European countries have also gone out of their way to block development of other sources of gas such as through fracking, and even to close still viable nuclear and coal power plants all due to often marginal if not imaginary green concerns.

The major LNG producers, Australia, Qatar and the US, are potential sources of gas, but LNG sold overseas in the fast-expanding market for the fuel are typically purchased under long-term supply arrangements. As prices have been high for many months LNG production trains are operating at full capacity, with all production sold forward. There is little to spare for European consumers.

One fact noticeably absent in all of this is the immense renewable energy assets which the UK and Germany in particular have built up over years of screaming by green activists that doom is just around the corner. This is in part because solar power does not count for much in the dead of winter in Europe and wind farms have been affected by a wind drought. UK academics have noted that 2021 was an unusually still one, with UK power company SSE reporting that its renewable assets produced 32 per cent less power than expected.

Although last year was unusual, calm periods, or wind droughts as they are now called, associated with high pressure systems are a feature of European weather – a feature that has not been a factor in economic life since the days of sailing ships.

With less wind than expected and gas at a premium, both Germany and Britain have restarted coal plants – although coal remains a small part of the UK’s generating capacity – and the roller coaster ride of coal prices continues with a major upswing in price.

An assessment of electricity prices for EU countries by the union’s statistical body Eurostat for the first half of last year found that green-mad Germany had the region’s highest electricity prices, followed by Denmark which has been boasting about its use of renewables. Renewables-mad Spain is in fifth place.

All of this is a world away from the airy confidence of activists that the adoption of renewable energy adds up to a new industrial revolution of clean, cheap energy while coal is consigned to the rubbish bind of history. Instead, renewables are increasingly likely to be seen as a footnote in coal’s grand march through history.




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