Al Gore Calls Global Warming Skeptics Racists
“One day climate change skeptics will be seen in the same negative light as racists.”—Al Gore
That was the story from an Al Gore video interview published recently on UStream TV online. Obviously it was designed to be provocative because the climate change folks have little left in their arsenal after climategate revealed that the global warming theory was based upon “cooked” science, academic bullying and bravado.
Al Gore is a smart guy and surely he realizes he cannot resurrect the once frenzied concern about global warming, err—climate crisis, err—climate change (insert politically correct name du jour here) so easily. So he’s doing what has worked before in so many political campaigns—he’s playing the race card, as Bill Clinton might say. But having seen that dirty trick used before we no longer accept it as fact.
Al Gore can still get headlines with his bombastic rhetoric but mostly on slow news days these days. The video is likely to haunt Al Gore someday soon much like the old wizard revealed behind the curtain as a trickster.
But unlike Dorothy who believed, we no longer believe.
The Daily Caller picked up this story and ran it on one of its slow news days when nothing more could possibly be said about President Obama’s vacation. But if Gore did the interview, as he claimed, to try to reclaim the conversation from the skeptics it did not appear to be working out too well for him by judging from the comments posted.
Whether history judges Al Gore as a new Paul Revere warning of crisis ahead or an old snake oil salesman peddling junk science and politically correct policies remains to be seen.
We do know this: The more interviews Al Gore gives on this topic the less we believe it.
Related articles
- Al Gore and the silencing of debate (usapartisan.com)
- Al Gore: Climate Denial Must Go the Way of Racism (treehugger.com)
- Al Gore – When Being A Lying Deuchebag Just Isn’t Enough (hooglyboogly.co)
- Al Gore Compares Climate Change Skeptics To Civil Rights Era Racists (thenewspundit.com)
Green Biz Crowd says AB32 will send California over the Cliff
The California Air Resources Board (CARB) adopted its first round of rules to implement AB32 this month. While the rules do not kick in until 2012 and most of the “allowances” required to emit greenhouse gases will be given away until 2015 it still is cause for celebration or alarm in the Golden State and elsewhere.
RenewableBiz is part of the green press crowd that closely follows the renewable energy market. It is doing a quick poll of its readers running from December 19th to January 1st recently asking:
Which statement most closely resembles your view of California’s adoption of a cap-and-trade system for CO2 emissions?
A boom in the clean energy economy has been started24% (9 votes as of 12/13/2010)California’s economy will be driven off a cliff43% (16 votes as of 12/23/2010)
The state will muddle along like much of the rest of the country32% (12 votes as of 12/23/2010)
Are We Getting the Energy Future Wrong?
Once upon a time in a land not far away from our memory, we experienced an extended period of economic growth. We actually manufactured things here in the US instead of importing them from China. We built homes by the subdivision instead of tucked them into some odd-ball sized inner city space. We needed mobility so we built the interstate highway system. We sent men to the moon and imagined entirely new ways to communicate with each other. I’m describing, of course, the post WWII America that gave rise to the baby boomers and the technology revolution they created.
We needed energy to run that America and we built power plants that were fueled with coal because we had plenty of it and it was cheap. Yes it polluted the air and over time we got progressively more serious about cleaning it up with new rules and better technology.
And then the world turned upside down with oil embargos, energy crisis after crisis, the Fuel Use act which prevented using natural gas and then the Natural Gas Policy act which encouraged it, the Energy Policy act which allowed wholesale power competition and then the emergence of renewable energy from wind and solar since Three Mile island scared us off from building more nuclear plants and inflation and regulatory delays made them prohibitively expensive.
We went from being optimistic and growth focused to pessimistic and constraints focused.
Fast forward a decade and we’ve reached a middle ground where we’d like to manufacture things in America AGAIN to create jobs, but we’re worried about global warming (or climate change or climate disruption depending upon how Al Gore explains the latest meltdown of his Inconvenient Truth) so today we focus on optimization and venture capital is being thrown at smart grid and its assorted technology disciples to conquer this middle kingdom.
Coal has not gone away but we don’t build as much of it anymore. Nuclear power has not gone away and we plan to build one new nuke in the South if the Japanese will build the containment vessel, the Chinese will let us into their AE queue, and the NRC will stick with the plan approved instead of changing it constantly whenever some group gets nervous.
Living in a scenario driven by optimization around green goals is a wonderful place to be if you can get there. But the costs are high because the technologies are new. Wind and solar are plentiful but intermittent and need back-up and besides the wind blows in places far removed from the markets we need to serve and the transmission lines are not always adequate to the task. And then there is still the Chinese quest for market share buying every commodity they can for domestic use, building export capacity to drive down prices just enough to discourage US manufacturing competitiveness in wind turbines, solar panels and many other products which as an intended consequence reduces industrial demand enough to discourage building the kind of baseload power plants with cheap domestic coal we used to build.
The question is are we getting the energy future wrong?
- Lower Average Energy Costs with Baseload. If we want to manufacture more things here at home and create jobs we will need steady or lower energy costs. The kind of energy costs we got from building baseload generation in a market environment where the incremental costs of new capacity brought down the average costs for all.
- Improve Efficiency through Competitive Market Forces. We’ve learned that wholesale competition for power generation is great at driving out the excess costs and driving up the capacity factors and efficiency of the plants. In a study we did of divested old power plants in the last decade we found that the improvements in the way the divested coal plants were operated produced enough efficiency gains to power 25 million typical American homes for a year. Similar improvements were found in the divested nuclear plants.
- Create Competitive Market Conditions for Manufacturing and Job Growth. There is much the US can do to restore its competitive market position and create jobs—driving up taxes and the costs of doing business are not among them. When we get serious about growth again we can get our groove back. The recession has officially ended but the pain continues, but America seems ready for changes in tax laws, investment policy and a focus on growth and job creation to create those competitive conditions.
So what?
There is nothing wrong with adding renewable energy, smart grid, efficiency and other technologies and strategies to our energy mix. But they are not sufficient to get the job done without tax and investment policies and certainty in our regulatory conditions to attract investment, restore economic growth and create jobs.
Our policy should focus on bringing down the average cost of doing business and that includes lower average energy costs. The only way to achieve that is through economic growth to increase energy demand with the baseload energy and competitive market policies (not un-sustainable dependence upon subsidies) to achieve it.
The place to start is creating a ferociously attractive market in off-peak energy use to jump start manufacturing and production again and then sustain that with the baseload resource to live into our long term economic growth strategy of getting our groove back.
Western Climate Initiative Goes Bust!
The Western Climate Initiative partners meeting is being held March 3rd in Vancouver BC, but there won’t be much cheering in the stands after Arizona Governor Jan Brewer issued an executive order officially pulling Arizona’s commitment to reduce greenhouse gas emissions to reduce emissions to 15 percent below 2005 levels by 2020 as part of the cap-and-trade approach the Western States and Provinces agreed to in 2008. [1]
Back then the Federal Government under President Bush resisted action on cap and trade and WCI was seen as a politically correct strategy for encouraging collaborative action along the lines the Northeastern States had taken earlier in forming RGGI—the Regional Greenhouse Gas Initiative. Fast forward to the November 2008 election of Barack Obama and the Feds shifted their strategy and Waxman-Markey Cap and Trade legislation began rolling as a prelude to the main event which was to be a new global treaty at Copenhagen’s COP15-fest.
We’re Behind You California—Way Behind You!
That is the headline to the story of the WCI today, but despite having ten remaining WCI members only the Golden State—now out of gold—is the only one of the WGI partners actually moving forward. In November 2009, the California Air Resources Board issued a preliminary draft regulation for its AB32 Global Warming Solutions Act implementation. [2]
The recession has had a sobering effect on all these partners and was the official reason for Governor Brewer’s executive order in Arizona. She said the cap and trade program would “devastate Arizona’s economy” and instead the state would use nuclear, solar and other renewable energy sources. But that was true before the recession except Janet Napolitano was Governor then moved on to be Homeland Security Secretary to President Obama.
Indeed, there was an embarrassing dust up recently when one Arizona legislator filed a bill to reclassify energy from the Palo Verde nuclear plant toward meeting the State’s renewable portfolio standard goals thus effectively ending the program by achieving its goal. While the bill was later withdrawn after howls of protest by the solar lobby the point had been made.
The problem for California is that it is now committed to implement AB32 by law. But the cold reality of achieving the policy objectives of AB32 will require natural gas prices of $13.87 per mmbtu and a carbon tax of $100 per tonne in order for the cap and trade program envisioned to be effective in changing behaviors enough to actually achieve the goals according to the CPUC and the CEC—the state agencies responsible for implementing it. And we’ll need to invest billions in new transmission lines to bring all that clean and renewable energy from Arizona to the Golden State—only one problem, we don’t have any gold to pay for it.
[1] http://www.azgovernor.gov/dms/upload/EO_2010_06.pdf
Factors Shaping the Smart Grid End Game
There is a growing body of anecdotal evidence to suggest we may be at the crest of the smart grid wave and key players are beginning to map out an exit strategy. They are not yet running toward the exits but there is a sense that time may not necessarily be their ally so the pace is quickening.
Smart grid hype was born out of the global warming movement in the belief that improved efficiency in the use of electric power would result in easier access for clean and renewable energy from wind and solar, fewer line losses or wasted power, and better grid management. And there is some truth to these beliefs since the transmission segment of the electric power value chain has been the most neglected. It has always been tough to build transmission lines because of NIMBY problems so smart grid became a way of wrapping transmission expansion in a political correctness that might make it more acceptable. After all, getting that wind energy from West Texas, Wyoming and Iowa to the load centers that need it most requires transmission. Likewise, unleashing the solar potential of Arizona and the Mohave Desert to bring that clean energy to Los Angeles meant investing in wires as well as solar panels.
The excitement over smart grid was fed by the seduction of billions of Government, venture capital and utility investment in smart grid technology. And it has now produced deal flow sufficient to accelerate installation of smart meters, sensors, boxes and the networks needed to live into the cleantech potential it promises.
So why—-when smart grid potential is reaching its peak is this first wave of investors in smart grid looking for ways to cash in or cash out?
Signposts of the Smart Grid End Game Taking Shape?
- Cleantech Investors were in it for the flip. Many of these early Silicon Valley cleantech investors are not “true believers”. They saw cleantech as a profitable way of aligning the market and politicians to cash in on the global warming concerns. Just like Al Gore, these players looked for ways to make money on our fears and pain points. Seed money produced a wide range of start-ups all across the cleantech value chain leveraging the networks, software, gadgets and chips that made Silicon Valley famous. More importantly, it created a global market for the innovative technology America does best and united it with the low cost manufacturing efficiency of China and the social welfare tendencies of Europe “juiced” by the EU fear being dependent upon Russian gas. Obama became the darling of Silicon Valley because he proved willing to spend our money pursuing a policy regime that enlarged the Government’s industrial policy and social engineering—and paid off for Silicon Valley. But now it’s time to put lipstick on this pig and flip it. So Silver Spring Networks is talking about IPO? Consolidations from M&A is speeding up as smaller weaker players are acquired by stronger ones. This is happening sooner than expected but the return on investment is sufficient to do well by having “done good” before the risk erodes the value peak.
- Risks for Smart Grid Investor are Rising. The dirty little secret of smart grid is that all that investment in smart meters, networks, sensors and gadgets is meaningless unless state regulators and politicians do two things they are loathe to do—raise rates and build transmission lines. Since ratepayers are charged based upon average cost based rates they have little incentive and even less ability to influence demand on the system. Smart grid technology works by using real-time pricing so that customers, being exposed to the volatility and high costs of on-peak power change their behaviors and reduce demand. Smart grid technology taken together is well suited for this, but customers are not ready for it and politicians see it as something to consider—in the future. As a result we get all the embedding costs of adding smart meters and none of the benefits. Add to that the need to build new transmission to bring that clean wind and solar power to load centers and costs are going up—and so are rates. Not a good set of facts for investors seeking to monetize their start-up investments so it might just speed up the exit for many.
- Ratepayers are angry over rising utility rates. The cumulative cost of all this “do-gooding” is beginning to hit the utility bills just when ratepayers can least afford it. The result is pushback by ratepayers, complaints to politicians and pressure on utility regulators. But it is too late. The costs of years of procurement of cleaner, but more expensive renewable energy is coming due. The rate impacts of program after program of energy efficiency, demand response, subsidies and feed-in-tariffs paying above market costs to get cleaner energy resources built is going into rates. In California, PG&E gets pushback in Bakersfield over high utility bills and politicians run for cover. In Colorado, Xcel Energy does “good” by sponsoring Smart Grid City but when the cost go up—way up, the Colorado regulators slap it with a prudency review and threat of disallowance. In Florida, the Public Service Commission denies most of FPL and Progress Energy’s rate increases and both utilities respond by slashing capital investment and thousands of jobs. It’s getting ugly out there in ratepayer city—and the worse is still to come.
- We Told You It Would be Expensive! The age old process of CYA is setting in big time across the smart grid landscape. In Spain and Germany, the use of feed-in-tariffs to pay above market costs for solar energy imploded in the recession and the governments decided they could no longer afford the subsidies. The action in Spain pulling back on the FiT caused worldwide chaos in the solar PV panel supply chain as Spanish vendors dumped panels at less than cost to avoid being stuck with them sending PV prices around the world plummeting. The lesson: what lives on unsustainable subsidies cannot be sustained when they dry up. Now in the US there are growing concerns that utility investment in smart grid especially smart meters may turn out to be a poor one since the prospect of real-time pricing diminishing at the same pace as the rise of ratepayer squealing about rate increases. The same is true of other global warming “solutions” where in California the implementation of AB32 remedies to reduce emissions are likely not cost effective unless the market price of natural gas rises to $13.87 per mmbtu and a carbon tax of $100 per tonne is imposed according to the state agencies responsible for implementing this law. Even in California we have limits.
- Settled Science is, perhaps, Not So Settled after all. The meltdown of the Copenhagen COP15 climate change treaty process is only one of the problems plaguing the proponents of global warming solutions. The IPCC panel scandals over research manipulation has destroyed the credibility of the foundation for smart grid, AB32 like draconian measures to reduce emissions, real-time pricing and perhaps even renewable portfolio standards for clean energy by the time it runs its course. I am not cheering this on, just stating the reality that the implosion of the scientific basis underpinning all this hype on global warming and smart grid or clean energy solutions tarnishes these strategies in the face of their staggering cost. Perhaps, we do have time to find more balanced, affordable, cost-effective solutions that do not require the remaking of our global economy. And besides that, unless China, India and a few other fast growing economies agree to play by the same rules there is little reason to commit economic suicide to pursue a policy prescription that will not work to reduce emissions.
So what?
So the pendulum is swinging back and a sense of balance, proportionate response, and re-examination of the facts and science is likely to save us from our own political folly—this time. Cleantech investments will produce a rush of new products that the natural process of consolidation and flip will combine into better solutions. Subsidies and stimulus will give way to economic rationalism once again. The aftermath of the recession will have purged our economy of its unrealistic leverage and our next few rounds of elections in the US and EU body politic will purge incumbents and relieve the pressure of excessive spending—we hope.
Investors in cleantech and otherwise will do what they do best—harvest profits and move on to the next big thing. And their investment in smart grid may yet be realized—not thru stimulus or subsidies but by leveraging the convergence of information technology, communications, entertainment, security and, yes—energy management to create the next generation of ‘must have’ and oh so cool products we will gladly spend money to acquire and use. Look around you, it is already at work.
Check out the latest AT&T ad for its iPhone which touts—almost in passing—the iPhone App for “did we turn off the light at home before we left?” It’s here today. Or consider the new Comcast ad for Xfinity, the next generation of bundled services with 100 mbps bandwidth for streaming TV combined with VOIP, cable TV and a menu of thousands of movies and soon apps to meet your every need.
Smart grid investment will pay off in the long run but not because we bankrupted ourselves to install them—-but because —in the nick of time—we didn’t!
Unsettled Science
It appears that climate science is not as settled as Al Gore professed even as late as Copenhagen. Reports of “errors” keep piling up as researchers take a fresh look at key findings and reports emanating from the international bodies and research universities most responsible for the body of literature being used to shape the world’s environmental and economic future.
“Skeptics Up, Obama Down, Cap and Trade Dead”
That was the conclusion of an ongoing series of investigative news reports in the UK on the IPCC and other research institutions linked to the UN’s Climate Change policy analysis. [1] Just a month ago, the panel was forced to retract is report on the rapid melting of glaciers after it was found that it could not be supported by the evidence. [2]
Correction Course on Political Correctness in Progress
That scientific research has been tilted toward a favored policy outcome is neither shocking nor new. That the rest of the science community tolerated this “junk science” so long is the real tragedy. This kind of passionate inquisition has been going on for centuries, but rarely has so much money been spent pursuing political correctness nor the risk of economic harm from such policy prescriptions so profound. From faster melting glaciers, to rain forest collapse to agricultural production declines in Africa, the list of dire conclusions now being shown as based upon inadequate research, suddenly unavailable data, or just unsubstantiated opinion keeps coming like a slow trickle turned into a major flow.[3]
Exposing these “research errors” is useful and timely to be sure. We can only hope that this tilting of science for the sake of continued research funding, professional advancement and tenure, or just vanity will be exposed and the erring parties discredited. But where was “peer review” when we needed it?
As humans, we understand human failing, and can forgive it even as we discipline those who engage in it. But we expect more from our governments and our rising cynicism and trust in government has a far more lasting and corrosive effect when we discover we are being mislead on the science and then mislead by politicians about the policies proposed as a result of reading that ‘political’ science.
It is NOT about the Environment, Stupid!
It would be a mistake of equal or greater proportion for those who cheer this collapse of climate change research to take it as repudiation by the public of our collective interest in being good stewards of the planet. The environmental movement has succeeded in persuading us that we must all act responsibly, avoid unnecessary pollution, and decry actions that needlessly despoil the planet or cause harm. We still expect to leave the earth a cleaner place for our children than we found—as the cliché goes.
But something is changing in our sense of environmental responsibility.
This exposure of bad behavior by climate scientists will result in more skepticism to be sure from this experience, and a better sense of the need for balance as a consequence of the economic recession we have experienced. We still expect environmental responsibility. But our definition of environmental economics is changing to include more balance of the cost and consequences of proposed policies against the benefits of enacting them.
Is there a Good Outcome from this Bad Science?
This could mean some profound changes yet ahead in the US and around the world after the effects of this climate change “crisis” plays out through the next election cycle:
- Reality Therapy in Mexico City. Hopes for a COP15 “do-over” in Mexico City should be diminishing considerably. If anything, the next UN conference in Mexico City should be a place full of confession, repentance, remedial education and soul searching about the important of academic rigor, peer review and transparency as a foundation for re-starting the debate about the real science of climate change.
- US EPA Endangerment. US EPA must quickly back off its threatened endangerment finding before it risks having its authority in the matter gutted by an outraged Congress looking for someone to hang for this climate change embarrassment. More than Waxman-Markey has been left bleeding on the sausage making floor of Congress, the Administration now lacks the political authority to pursue the same agenda by regulatory fiat.
- The Environmental Responsibility Act. Congress should require all Federal agencies and State governments using Federal money to include in any environmental impact statement or environmental review and/or Federal rule making an analysis of the economic impact of any such proposed action and a finding, subject to judicial review, that balances such costs and benefits in the public interest. The law should also include a “loser pays” provision in environmental litigation to assure that environmental lawsuits are not used as tactics to extract settlements or pursue political agendas.
- AB32. This California law to regulate greenhouse gas emissions is actually an income redistribution tax act designed to evade the two-thirds rule on budgets and taxes in the California Legislature. It gives the California Air Resources Board the authority to set carbon taxes administratively on an annual basis. The likely consequence is that such fees will be pegged to the size of the California budget deficit and, conveniently, requires no elected official to actually vote to raise taxes. The California Energy Commission and California Public Utilities Commission have reported to the Legislature that they believe a carbon tax of $100 per tonne would be required to implement the policy goals of AB32 and the companion 33% RPS standard. The collapse of the climate science foundation for AB32 will expose it for what it is. Besides, with RGGI and EU carbon credit prices falling like a rock to about $2 per tonne, AB32 will not likely produce the revenue California politicians’ dream of anyway after the climate science is “settled”.
So what?
Maybe unsettled science is a good thing if it forces a balancing of the costs and benefits of major policy changes in environmental laws and other public policies. Voters are in a surly mood over the state of the economy and their anxiety about their own financial future. This is the kind of political climate crisis that brought us Proposition 13 in an earlier California era. Today there is no similar ‘quick fix’ for California unless we hit “reset” by authorizing one of the ballot measures being circulated today calling for a state constitutional convention. For Congress, the path to hope we can believe in is actually swifter the old fashioned way Americans love—“throw the bums out” in the November 2010 election.
[1]. http://www.theglobeandmail.com/news/opinions/the-great-global-warming-collapse/article1458206/
[2] http://www.telegraph.co.uk/earth/environment/climatechange/7177230/New-errors-in-IPCC-climate-change-report.html
[3] http://www.timesonline.co.uk/tol/news/environment/article7017907.ece
The Global Warming Sting: California Balances its Budget and Saves the World
The sting was revealed but the hook is not yet set by the January 11th exposure[1] of a “dispute” among the 16 member California Economic Allocation Advisory Committee (EAAC) whose purpose is to figure out how to spend the money from carbon taxes envisioned by AB32, the California Global Warming Solutions Act.
The Set Up
On January 11th the EAAC presented final allocation recommendations to the State. So this is a trial balloon to see how much angst this approach stirs among the politicians, special interest groups, and seeks to avoid enraging voters before the next election. By framing this “dispute” among members, the EAAC is setting up the potential for a sting of California consumers depending upon how the rest of the process plays out.
The timeline for the rest of this process is that a final public conference call will be held in February 2010 to adopt its economic impacts report. EAAC Chair Goulder will present both reports to the California Air Resources Board February 25th. In Fall of 2010 along with the final proposed cap and trade rules, the CARB staff is expected to recommend a final allocation approach which will purport to balance EAAC recommendations and public input. This is when the hook will be set if the political will exists to do so. There is the minor problem of the November 2010 election looming and voters in California as elsewhere are growing surly.
The committee imported a Harvard environmental economics professor, Robert Stavins, director of Harvard’s Environmental Economics program, to testify that the California approach complies with the AB 32 intent and that the proposed carbon taxes should not fall heaviest on poorer people. He opined that a cap-and-dividend approach produced fewer benefits than cutting taxes on labor and capital.
The much maligned Waxman-Markey Bill passed by the US House uses most of the proceeds from sales of emissions allowances to reduce power company costs of compliance by essentially awarding them free permits to reduce the expected spike in utility rates. This approach sidelined a number of major utilities who fatalistically decided to get the best deal they could rather than be painted as obstructionists. There is a Senate bill by Senators Boxer and Kerry which is closer to the approach being used in California, but it has gone nowhere as yet on Capitol Hill.
Placing the Hook
At its January 11th meeting, the CEAAC members endorsed a “cap-and-dividend” approach which would set prices for CO2 emission allowances as a tax on producers and then use the money raised as a “dividend” to consumers to help reduce their burden of paying all those higher prices for everything that uses energy. The discussion by staff presenting ideas to the committee suggested an annual energy “dividend” for a family of four might be about $1,000.
Sounds good, right?
Not so fast, the committee was divided on whether the best way to use this pot of gold at the end of the global warming rainbow was to give it back directly to consumers or instead use it to create “tax cuts” in state income taxes or sales taxes that will have to be raised to balance the state budget!
The timing was subtle but perfect. Waxman-Markey has stalled in Congress and COP15 turned into a food fight between developed and developing countries and resulted in egg on all their faces. So California with AB32 safely adopted has the opportunity to recapture the leadership flag and show the world how things are done in the Golden State.
Meanwhile, the State is facing another $22 billion deficit because of the recession thus the convenient convergence of the need to develop an implementation plan for AB32 and address the growing California budget deficit sets up the “the sting” that should earn the State an Oscar for best supporting actor in a political drama. Nothing tops the Federal Governments hubris for spending, taxation and income redistribution for Best Actor nominees this year.
Perfect Sting or Fatal Error?
So will California use Carbon Taxes to fill the hole in its state budget? The perfect cure it seems to state politicians. Will they save the world and save their behinds at the same time all while calling these new carbon allowance revenues “dividends” or using them to “reduce taxes” that they must raise rather than reduce spending to close the budget gap? Or will this fatal attraction and sleight of hand turn into a fatal error in the November 2010 elections. High stakes!
But I saved the best part for last, his vast income redistribution scheme would not require the Legislature to actually vote for any nasty tax increases since the California Air Resources Board would administratively each year set “carbon allowance fees” sufficient to raise the revenue needed to meet the Legislature’s spending desires and balance the budget and then the Legislature would declare a “dividend” to give a modest portion of the revenue back to consumers while taking credit for being fiscally responsible balancing the budget by keeping the lion’s share for budget spending. This has the added political benefit of reducing the hostage taking behavior over the need for a 2/3 vote to raise revenue or reduce expenditures each year in passing the state budget. The debate among the 16 members of the California Economic Allocation Advisory Committee is not really what to do but how little of the revenue must be given back to consumers.
[1] http://www.climatechange.ca.gov/eaac/meetings/index.html
$100 Carbon Tax or Bust!
After the collapse of the COP15 treaty prospects, proponents of curbs on emissions are scrambling to find Plan B. It is not an easy thing to do. In the US the best prospect to breathe life back in the emission reduction campaign, the Waxman-Markey cap and trade bill, is dying a slow death in Congress where fears about another hit on the economy in the face of persistent 10% unemployment has sent members running to the exits.
Carbon Allowance Prices Fall
Meanwhile, in carbon markets in Europe and the US carbon credit prices are plummeting and with them hope that cap and trade will provide the incentive for significant reductions. EUA (European carbon allowance) futures ended 2009 at 12.53 euros/tonne, down 21 percent from 2008 closing prices as reported by Reuters. The Regional Greenhouse Gas Initiative covering the Northeastern states held an auction for CO2 allowances and the price came in at a little over $2.00 per tonne.
On voluntary carbon markets, where allowances are traded based upon bets about demand for them in the future prospects for passage of Waxman-Markey were not good and futures prices for allowances fell. 2010 vintage carbon futures on the Chicago Climate Exchange fell from $1.65/tonne to only $0.15/tonne in 2009. Reuters reported that 2009 volumes for voluntary carbon offsets were 40-50 percent below 2008 volumes, and demand fell substantially in December, which is usually a busy month is that market.
Going into 2010 the futures markets in allowances was horrible. European industrial firms were busy estimating their emissions output for 2010 in order to sell excess EUAs early while prices were higher than forecast for later in 2010. Not a good sign for the allowance market or policy makers who expect dumping EUA early will lead to even lower prices later in 2010.
The Ticking Time Bomb in Cap n’ Trade Models
That allowance price problem was the context for the questions put to Dr Severin Borenstein, Director of the UC-Berkeley Energy Institute. Severin is a very smart, very savvy guy who has been at the front lines of energy research long enough to know a few things about policy analysis. Speaking recently at a meeting of private equity players focused on the clean tech and energy space he commented on allowance prices and whether cap and trade legislation could revive prospects for effective green house gas emissions reduction policies.
“There is a ticking time bomb under these cap and trade models. Most studies ignore the supply elasticity of fossil fuels. Analysis to date hasn’t focused on resource price change in response to cap and trade – resource scarcity and price changes are likely to be central,” he said. [1]
He went on to say that he felt that it would require a carbon allowance price of between $80 and $100 per tonne to displace coal. Achieving significant reductions in greenhouse gas emissions needed to focus on that coal displacement goal or market participants would simply pay a lower carbon tax and make only modest changes in their behaviors.
Coincidentally, this is almost exactly what the California Energy Commission and California Public Utilities Commission said in their implementation report on AB32 the California Global Warming Solutions Act to the California Legislature.[2] In short, these state agencies charged with implementing GHG emissions reduction concluded that natural gas prices would need to be $13.87 or higher per MMBtu and the applicable carbon tax would have to be $100 per tonne or higher for the program to be effective in achieving its goals for emissions reduction.
So what?
The BIG PROBLEM Waxman-Markey supporters and environmental advocates face is to get their policy goal implemented they must raise gas prices and carbon taxes so high it will crater the economy and keep them there long enough to drive a stake through the heart of the coal industry once and for all so it cannot be resurrected.
If you think the greenmail price was high for a vote for ObamaCare in Nebraska and Louisiana wait until you see what it will cost to buy off enough politicians to get 60 votes for this cap and trade program in an election year.
And if Waxman-Markey cannot find 60 votes, then Plan B logically would be to unleash US EPA with its endangerment finding to wreak havoc on the coal and utility industries. The problem with such blunt instruments of torture as regulations is that a lot of unintended consequences can happen along the way.
[1] http://www.greentechmedia.com/articles/read/severin-borenstein-on-cap-and-trade
[2] http://www.cpuc.ca.gov/PUC/energy/Renewables/hot/33implementation.htm
COP15 Out!
If the world’s leaders who assembled in Copenhagen knew in advance, as everyone else did, that reaching an agreement to create a binding, enforceable treaty obligation to reduce greenhouse gas emissions by defined targets by specific dates, the final outcome of this week’s grand event to save the planet was all the more a sham. But a litany of sober speeches and prospects of doom were not enough to bring the parties to agreement—except to keep talking.
So what?
Let’s face it, this is a wonderful outcome to what could have been a total train wreck. An enforceable treaty would, almost certainly, enacted sweeping wealth redistribution, onerous carbon taxes to pay for it, the mass migration of energy intensive business from countries on the hook to those on the lam. This was a climate crisis of epic proportions in the making.
In drama it was only upstaged by the circus going on in the US Congress surrounding health care reform, cap and trade, the need for more stimulus since the first two plans did not work, and the Omnibus Defense Spending Bill that looks more like the Omnibus Christmas Tree with all its promised earmarks seeking to buy votes for other lost causes.
But wait, maybe they are related. Did President Obama go to Copenhagen because he thought he had a better chance of getting something there than on Capitol Hill? The odds now look like he will fail in Congress like he failed in Copenhagen.
New Year’s Resolutions
It is good that we will have a few days break to ponder the significance of all this hot air and lost momentum while the spin-masters work their magic to explain down expectations. This will force many camps to revise their New Year’s Resolutions:
Al Gore: Step up sales of emissions credits as fast as you can while this gravy train still has legs. I need to make another $100 million before this thing collapses of its own weight.
True Believers: We’ve been screwed. These lying, cheating, back stabbing politicians will say anything but even when we had them in our grasp we could not close the deal. Damn! This was our best shot and we blew it.
True Deniers: We’ve been saved. Those liberal do-gooders would have sold us down the river. Thank goodness for China and a few other countries that still believe in capitalism.
Carbon Marketers: Holy Methane! Our business model just fizzled out. How will we sell these same rain forest preservation deals now when everyone agreed to cheat.
Coal Producers: Burn Baby Burn! We are back in business.
CEOs: WTF! Why did I just agree to invest billions to make my company look clean and green when these politicians can’t even agree to count what I’m doing. Now the Chinese are going to go like hell to take my market share and Obama is still going to raise my taxes!
Harry Reid: We’re roadkill!
Nancy Pelosi: We scored a great victory in getting all these nations to work together and the long term results will show President Obama’s leadership made a huge difference. He deserves all the credit for this.
U.S. Chamber of Commerce: How Sweet It Is!
Moonwalking from Copenhagen
The countdown to Copenhagen is ticking away toward the UN climate change conference to be held there in December billed as a ‘must succeed’ event to save the world from the fate of global warming and greenhouse gas emissions.
Do I sound skeptical?
There is a lot at stake in the outcome of this over-hyped Copenhagen conference but the risks are mostly that the assembled politicians will engage in short term political correctness at the expense of long term economic growth. The good news is that there are enough conflicts among the countries participating that the real threat of consensus to do something stupid is fast diminishing as evidenced by the posturing going on to reduce expectations.
Reading the press clippings from the round of consultative meetings is akin to reading the gossip pages or watching coverage of a Hollywood event. As a student of history I am reminded of the infamous quip from Alice Roosevelt who said, “Dear, if you have nothing nice to say about people, please sit next to me.”
So what is being said?
- India Says Get Realistic. Environment Minister of India Jairam Ramesh laments that the Copenhagen delegates need to get realistic or the conference will face the same fate as the Doha Round of trade talks. Interesting that he should make such a linkage because the implications of any agreement on enforceable reductions in greenhouse gas emissions on economic growth is the key issue dividing developed countries and fast growing developing countries.
- Environmentalists Worry No Deal Will Be Reached. You can tell that this conflict is serious when the environmental groups complains about the lack of leadership going into Copenhagen necessary to reach agreement and worried that the talks might fail accuses the developed countries of EU and the US of continuing to “dodge the hard decisions on slashing their emissions and funding the transition to a low carbon economy.”[1]
- China Leads Developing Countries in Rejecting Enforceable Targets. In Bangkok at a recent consultative meeting of those going to Copenhagen, frustrations spilled out on the table as China led 131 of the 180 countries at these advance climate talks in accusing the EU and US of “rejecting historical responsibilities” and trying to “fundamentally sabotage” the Kyoto protocol and the international negotiations over what will replace it. Translation: We the developing countries successfully avoided any accountability for our rapidly growing emissions in the Kyoto Protocol and we have no intention of allowing you EU and US “do-gooders” to force us into being accountable at Copenhagen for reducing our emissions especially if it slows our economic growth.
- Sudan has the Audacity to Accuse Others of Not Taking Responsibility. Sudan chairs a group of emerging countries called the G77 at the talks. In Bangkok Sudan’s representative said that the rich countries want to “kill the protocol.” Translation: Leave us alone at Copenhagen like you did in Kyoto Protocol. We will not agree to any enforceable targets imposed on us.
- We Don’t Have the Votes to Pass Waxman-Markey. Carol Browner speaking for the US was forced to concede that there was no way the US Congress was going to pass this controversial bill before the Copenhagen event.[2] This was embarrassing for the Obama Administration which had hoped to have a bill signed by Copenhagen to wave in the face of the developing countries and complete the Obama apology tour for the US failure to sign onto Kyoto.
So the moon walking away from the Copenhagen cliff begins. . .
The Obama Administration says it wants an entirely new strategy to replace a legally binding world agreement with a voluntary one. This would be a big change from the Kyoto approach which set global emissions targets to a Copenhagen strategy of setting national targets. For the EU this is blasphemy, but it likely is music to the ears of China, Brazil and India—-and no one cares what Sudan thinks anyway.
Ironically, after pillorying George Bush over rejection of the Kyoto Protocol, the Obama Administration now is proposing to scrap it completely in favor of what appears to be a self-policing set of national targets. The US risks being accused of undermining the Kyoto framework and its system of defining global emissions reduction targets by the Europeans and the environmental groups. The issue between the US and EU involves how the national targets are set, but this can probably be finessed.
If the worst that emerges from Copenhagen is a set of fiery speeches about the horrors of global warming and emissions levels followed by a set of self defined and self enforced national emissions reduction “targets” that would be a good outcome.
It reflects another practical reality for President Obama—there is probably no way to get any Copenhagen Treaty—even a benign one approved by the US Senate in the run-up to the 2010 Congressional elections, and probably less chance after that.
[1] http://www.panda.org/?177782/Climate-talks-could-go-the-way-of-trade-talks-as-leaders-lose-nerve-WWF
[2] http://www.guardian.co.uk/environment/2009/oct/04/us-climate-change-bill-browner
