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Waxman in at Energy and Commerce

Posted by Daniel Hall on November 20, 2008

Hopefully some discussion of what this might mean later, but for now, just the news.  Via E&E Daily:

Waxman unseats Dingell as Energy and Commerce chairman

Darren Samuelsohn, E&E Daily senior reporter

Rep. Henry Waxman (D-Calif.) is the new chairman of the House Energy and Commerce Committee.

Waxman ousted longtime Chairman John Dingell (D-Mich.), 137-122, in a secret ballot vote of the entire House Democratic Caucus today.

With Waxman’s victory, many expect the Beverly Hills Democrat to bring a liberal voice to the podium as he crafts energy and environmental legislation for the incoming Obama administration.

Waxman has not given many details of his proposed agenda, but a clear look at his record suggests he will pursue aggressive pollution cleanup for all industrial sectors, as well as some of the most aggressive limits for U.S. business as it embarks on a first-ever mandatory program to curb heat-trapping greenhouse gas emissions.

Since 2006, Waxman has made headlines as chairman of the House Oversight and Government Reform Committee, which has given him a perch to investigate the Bush administration’s policies on everything from Iraq and climate change to the use of steroids in Major League Baseball.

Some of Waxman’s biggest legislative accomplishments on the environment stretch back to before Republicans won control of Congress in 1994. He fought Dingell and the Reagan administration in the 1980s over efforts to weaken automobile emission standards. And during the 1990 Clean Air Act amendments debate, Waxman clashed with Dingell while serving as chair of the Health and Environment Subcommittee.

Waxman’s first order of business may be to address the hurt feelings within the divided caucus.

Rep. Rick Boucher (D-Va.), whose status as chairman of the Energy and Air Quality Subcommittee is now in doubt, said he was bothered by Waxman’s challenge. “This whole challenge bothered me but I won’t be specific about anything,” he told reporters.

“I think it was highly inappropriate, there was no obvious reason for it other than the desire for another person to chair the committee,” Boucher said. “There was no real substantive reason.”

Aides to Obama and House Speaker Nancy Pelosi (D-Calif.) stressed they had not played favorites or encouraged the move, but numerous pieces of tangential evidence suggested they would prefer Waxman over Dingell. Obama last weekend named longtime Waxman staffer Phil Schiliro as his top liaison to Congress. And Pelosi has fought countless times with Dingell over environmental issues, at one point backing his opponent in a Democratic primary.

At least one Democratic leader did speak up for Dingell’s cause: House Majority Leader Steny Hoyer (D-Md.). While speaking highly of Waxman at yesterday’s Steering and Policy Committee meeting, Hoyer expressed concerns about the precedent of removing a sitting chairman who was a loyal Democrat and an able performer, a Democratic aide said.

The Steering and Policy Committee endorsed Waxman by a 25-22 vote yesterday.

For Dingell, 82, the vote marks the end of Dingell’s 28 years as the top Democrat on the Energy and Commerce Committee, although he will have the title of chairman emeritus. Supporters of the congressman from the auto industrial hub of Dearborn, Mich., stressed his long list of accomplishments in Congress, as well as a renewed commitment to take on a broad array of President-elect Barack Obama’s priorities, including global warming.

His public list of supporters included more than a dozen Blue Dog Democrats, as well as members of the Congressional Black Caucus, New Democratic coalition and Democratic committee leaders.

Members who spoke on Dingell’s behalf at the Democratic caucus meeting included Reps. John Lewis of Georgia, Diana DeGette of Colorado, Stephanie Herseth Sandlin of South Dakota and Mike Doyle of Pennsylvania, according to Boucher. Waxman spoke on his own behalf for about five minutes.

Alex Kaplun and Ben Geman contributed.

Posted in 2008 Elections, Energy, Government Policy | 1 Comment »

Assorted links

Posted by Daniel Hall on November 7, 2008

1. What is the likely direction of energy and climate policy under the new Obama administration and a Democratic Congress?  Joe Romm gives his thoughts on E&E TV; here is a panel of respondents at Green Inc.  There is a fair amount of wishful thinking floating around.  Count me among the skeptics that a cap-and-trade bill will pass in calendar year 2009.

2. Henry Waxman has launched an insurgency against John Dingell, attempting to take over as chairman of the Energy and Commerce Committee.  If you have an E&E Daily subscription there is a good article here.  Brad Plumer also provides ungated commentary at the Vine.  I don’t really know much about this but I will take a shot in the dark and predict that Dingell is not going anywhere.

3. Obama will keep Bush’s ethanol mandate.  Blech.

4. Here is another (longer) version of that story about carbon sequestration that Rich linked below.  Here is Sarah Forbes of WRI talking about guidelines they have published for CCS.

5. The Economist has a story this week on urbanization, largely touting its benefits.  It is a nice mix of economic geography and history.  Hmmm, no byline of course, but could this be the work of urbanist Ryan Avent?  Speaking of Ryan, he is blogging from a conference this week on urban design in a post-oil age; here he discusses the role of urban design in solving climate change.

6. And in (mostly) non-environmental economics news, everyone is aware, right, that one of the worst wars/humanitarian crises of the last half-century has now reignited in a big way in eastern Congo?  (Yes, I could make this on topic for the blog by discussing the natural resource curse but given the scale of the crisis at the moment that seems coldly academic.)  For those who are perplexed by (shamefully cursory Western) media coverage of events I recommend this post and its four predecessors from Wronging Rights.

Posted in 2008 Elections, Biofuels, Climate Change, Coal/ CCS, International, Natural Resources, Urban | Leave a Comment »

I voted

Posted by Daniel Hall on November 5, 2008

I went to vote after work today.  There was rain in Washington most of this afternoon and into the early evening.  I walked over to the school that was my neighborhood polling station with my umbrella.

I live in Brookland, a neighborhood mostly composed of African American families.  At 11 pm Eastern, when the polls closed in California and the networks declared the election for Obama, I wandered out onto my front porch with a couple friends.  In the distance I could hear a car horn going off, and someone was shooting off fireworks a couple blocks over.  The rain had stopped.  My neighbor across the street and a couple doors down emerged onto her porch.  She unfurled an American flag and hung it on a column of her porch.  My friends and I broke into cheering and clapping; my neighbor waved back and joined in.

Posted in 2008 Elections | 1 Comment »

Oh dear

Posted by Evan Herrnstadt on August 8, 2008

From Krugman in the Times:

According to one recent poll, 69 percent of Americans now favor expanded offshore drilling — and 51 percent of them believe that removing restrictions on drilling would reduce gas prices within a year.

Posted in 2008 Elections, Oil | 6 Comments »

Oprah Viewers Patiently Await Instructions*

Posted by Evan Herrnstadt on August 8, 2008

Craig Garthwaite and Tim Moore, economists at the University of Maryland, just posted a study that claims Oprah’s endorsement of Barack Obama netted him quite a few extra primary votes.  From the abstract:

Candidates in major political contests are commonly endorsed by other politicians, interest groups and celebrities. Prior to the 2008 Democratic Presidential Primary, Barack Obama was endorsed by Oprah Winfrey, a celebrity with a proven track record of influencing her fans’ commercial decisions. In this paper, we use geographic differences in subscriptions to O! – The Oprah Magazine and the sale of books Winfrey recommended as part of Oprah’s Book Club to assess whether her endorsement affected the Primary outcomes. We find her endorsement had a positive effect on the votes Obama received, increased the overall voter participation rate, and increased the number of contributions received by Obama. No connection is found between the measures of Oprah’s influence and Obama’s success in previous elections, nor with underlying local political preferences. Our results suggest that Winfrey’s endorsement was responsible for approximately 1,000,000 additional votes for Obama.

Because data is only available at a county-wide level, the authors used a logit model for group-level observations, with the vote share as the limited dependent variable in one equation, and the participation rate as a share of the population in the other equation.

On top of the estimate that Obama got 1 million additional votes (I believe this refers to increased margin, as it comes from the vote share equation) thanks to Oprah, the authors also estimate (using the participation specification) that she increased total turnout by about 2 million.

Is this feasible?  Well, according to Garthwaite and Moore, 8 million people watch Oprah’s show daily.  Okay, but are these viewers all really so eager to follow their talisman?  Let’s allow numbers to speak for themselves:

For example, in the case of Anna Karenina there were 11,648 units sold during the 12 weeks prior to inclusion in the [Oprah book] club. In the 12 weeks following inclusion, this book sold 643,122 units—a staggering increase of 5,421 percent.

* Shamelessly ripped off from The Onion.

Posted in 2008 Elections, Random | Leave a Comment »

Hammer

Posted by Daniel Hall on July 29, 2008

There is a debate going on in the blogosphere about whether some kind of carbon pricing legislation — almost certainly cap-and-trade — will get passed in the next Congress. Matt Yglesias (our favorite Greek philosopher) says that John McCain won’t do it if he becomes President, and Kevin Drum muses that Barack Obama might not either:

“Will McCain Abandon Cap and Trade?” asks Matt Yglesias. The short answer, of course, is yes. The slightly longer answer is that I think the question is ill formed. Cap-and-trade is one those enormous, mega-complex, special-interest magnets that’s almost impossible to pass no matter how committed you are to it. Getting it through Congress will take an enormous amount of political capital, and I wouldn’t even bet on Barack Obama making it a high enough priority to push it through.

Ryan Avent is more optimistic, noting that the alternative to comprehensive carbon pricing is not pretty:

What’s the alternative? Are the Dems really going to adopt the new conservative stance that nothing is the best policy? Or are they instead going to pass nickle and dime regulations by the handful, thus reducing emissions in a costlier, less efficient, and more special-interest friendly manner?

These guys are overlooking one very big fact: the Supreme Court has already ordered the EPA to regulate greenhouse gas emissions. The current administration has chosen not to do so. I would not bet on the next administration making the same choice, at least certainly not an Obama administration.

The choice is not between cap-and-trade or nothing, or even between cap-and-trade and (new) piecemeal legislation from Congress. The choice is between comprehensive carbon pricing through a cap-and-trade program or a site-by-site regulatory permitting process for CO2 emissions that operates under the current Clean Air Act.

Most companies are terrified — probably justifiably — at what such an approach would cost.  This completely changes the political calculation.  When the next administration threatens to drop the regulatory hammer on CO2, the amount of political capital it is going to take to move cap-and-trade legislation is going to fall considerably.

Addendum: Ryan also notes, “If political writers on the left and the right would focus more on the question of how rather than whether, pressure might begin to build to do pricing right.”  I cannot help but point out that this is exactly the question I addressed when I was guest blogging at Free Exchange earlier this month.

Posted in 2008 Elections, Cap and Trade, Climate Change | 3 Comments »

Cross-price elasticity: conservation vs. oil

Posted by Evan Herrnstadt on June 24, 2008

As I emerge from a long hiatus (Argentina and catching up with work upon my return), I’m going to ease back into blogging with a very brief econ 101 post.  Hopefully my economic intuition and vernacular aren’t too rusty (feel free to tear into this post* — it’s the only way I’ll get back in stride).  From the LA Times:

John McCain returned to Santa Barbara this week not to assert his opposition to offshore drilling — as he did when he ran for president in 2000 — but to make the calculated gamble that high gas prices have trumped voters’ desire to protect the environment…

We talk a lot about the environmental benefits of higher fuel prices as people change their lifestyles to reduce their consumption of fossil fuels.  However, it’s easy to forget that in some locales, the opportunity cost equation for environmental protection can include increased oil supply.  Essentially, conservation and fuel are an odd sort of complements.  When the price of fuel goes up, the demand for environmental protection curve shifts inward.  In the past, it seems that this cross-price interaction has been relatively inelastic, but this might be changing as we arrive at new reaches of the fossil fuel demand curve:

Los Angeles Times polls show that, in California, opposition to offshore drilling has not weakened even during past energy crises. But new national polls have shown that the country, burdened by exploding gas prices, supports drilling in sensitive areas.

Keep in mind that the impact on world oil prices from drilling in specific sensitive areas is likely to be small and somewhat temporally distant (see: ANWR), but this fact can easily be obscured by rhetoric and poor information.  Luckily, politicians usually try to stay away from those kinds of things…

*I’m guessing Daniel and I might not be friends anymore by this afternoon.

Posted in 2008 Elections, Oil | 1 Comment »

Climate policy as diplomacy

Posted by Daniel Hall on June 3, 2008

Ryan Avent has been doing a lot of good blogging about cap and trade recently. Today he assesses the political environment — the combination of near certain defeat for the Lieberman-Warner bill this summer with likely election returns this fall — and argues:

Congress is almost certain to be more Democratic next year, and the White House will be more friendly to climate bills whoever the president is (but substantially more so if Obama is the victor). … Democratic leaders are watching now to see how their opponents plan to fight, so that next year, they’re prepared to use their majority to effectively counter opposition en route to a truly good climate bill.

I thought this was a bit optimistic about how smoothly Democrats would operate next year, a point I made (rather sarcastically) in the comments.

In response, Ryan offers up a pitch-perfect response:

Ah, but you failed to take into account the fact that Obama is going to CHANGE WASHINGTON WITH CHANGE WE CAN BELIEVE IN YES WE CAN.

This is still making me chuckle after repeated reads.

I happen to agree that among the presidential candidates Obama would get a climate bill with the least amount of political wrangling and infighting. But relative to what? There is going to be pork all over the floor before this thing gets done and that is just the facts. The domestic political machine has to run its course and President Obama is not going to be able to strong-arm Congressman Dingell into rolling over on Detroit or Senator Reid into greenlighting Yucca Mountain.

So why do I think that Obama could get a bill with less partisan hackery even while I’m pessimistic he’ll do much to change Washington? I think it’s because I view Obama as being most concerned among the candidates about America’s standing in the world and with reaching out to our partners. Having America perform an about-face on climate policy could be a key part of a broader diplomatic strategy of engagement and cooperation. This could then put indirect pressure on Congress to deliver a well-designed bill.

In the end I guess I am agreeing that Obama does have the best chance of getting legislators to work with him on climate policy but I am positing a different channel through which this works.

I think the challenge he will face if he chooses this strategy is to simultaneously be realistic about the domestic policy constraints he faces and not promise allies things that he cannot deliver, while at the same time having a clear set of goals that do indeed signal American leadership on global climate policy along with concrete strategies for how he is going to get people on board with his goals.

Posted in 2008 Elections, Cap and Trade, Climate Change, International | Leave a Comment »

Tight

Posted by Daniel Hall on May 1, 2008

Yes, this McCain-Clinton idea to suspend the gas tax is stupid. I think the best quote I’ve seen so far comes from Len Burman via Greg Mankiw:

Yesterday I was on the NewsHour to talk about the gas tax holiday. I asked if there was another guest and the producer said, “We tried, but we couldn’t find anyone to argue the other side (that the gas tax holiday made sense).”

The more interesting part of the discussion is not the piling on — though certainly people should be pointing out how mind-bogglingly stupid this proposal is — but the discussion about tax incidence. Most commenters are arguing that producers will benefit more than consumers from the tax holiday, because summer oil supply is very tight. As Greg Mankiw describes it:

What you learn in Economics 101 is that if producers can’t produce much more, when you cut the tax on that good the tax is kept . . . by the suppliers and is not passed on to consumers.

Or here’s Paul Krugman:

Why doesn’t cutting the gas tax this summer make sense? It’s Econ 101 tax incidence theory: if the supply of a good is more or less unresponsive to the price, the price to consumers will always rise until the quantity demanded falls to match the quantity supplied. Cut taxes, and all that happens is that the pretax price rises by the same amount.

But Tim Haab is not so sure that supply is less responsive than demand. He nails the theoretical explanation. In fact, if you really want a great straightforward description of tax incidence, see this pair of posts he wrote just last month. Pay particular attention to the chart in the second post, which graphically depicts what he says here:

Only two cases are clear cut. If buyers are price insensitive and and sellers are price sensitive (top right panel), the buyer will bear the burden of the tax. If sellers are price insensitive and buyers are price sensitive (bottom left panel), sellers will bear the burden. In cases where both are sensitive or both insensitive, the results are unclear and depends on the relative sensitivities.

But in arguing today that producers are more price sensitive than many people may think he gets some facts badly wrong. Specifically he uses this chart to argue:

So when will supply of gas be perfectly inelastic? The most obvious answer to me would be when refineries are running at full capacity over the relevant range of prices. That is, regardless of the market price, refineries can’t keep up. Is that the case? The chart to the right gives U.S. refinery capacity and gasoline consumption in gallons per day from 2002-2007. On average, U.S. refineries produce at about 50% capacity. (emphasis added)

No. Just… no.

The problem is Tim compares refining capacity data to gasoline consumption. This is an apples-to-oranges comparison. Capacity is measured by the input — crude oil — and this is being compared to a specific output, gasoline. But refineries produce many things besides gasoline — jet fuel, home heating oil, etc. — and even if every U.S. refinery were optimized to make gasoline (which isn’t the case) there would still be losses from the refining process itself.

As it turns out the EIA* actually publishes weekly data on refinery capacity margins (or “percent operable utilization” as the EIA calls it). I downloaded the series to create the chart below. Note that with the exception of Katrina (September 2005) that refineries have run at 80-98% capacity over the last few years (most typically from 85-95%). Note that there is also a seasonal pattern: utilization usually declines in winter and peaks in summer. This would imply less elastic supply in summer. Note also, however, that refineries are entering this particularly summer with the lowest capacity utilization rates we seen in spring in awhile, around 85% instead of 90-95%.

What would I conclude from all this?

1. If you wanted to maximize the portion of this tax ‘refund’ that went to oil companies, you should make the gas tax holiday during summer, when supply is most inelastic.

2. Compared to previous years, producers would probably benefit less from the gas tax holiday this year, since capacity margins are down.

3. Despite the factual errors and the incorrect implication that summer gas supply is fairly elastic, Tim is probably right when he says, “maybe the tax holiday might have some effect on both consumers and producers.” Why is that? Remember, demand for gas is also very inelastic. In other words, which world are we in? I say the bottom right case in this chart.

This guy sums it up pretty well when he says,

the gains of the tax cut will be split evenly between producers and consumers… I’m not saying that the gas tax cut is a good idea. In fact, I think it’s horrible pandering that wont help anyone in the long-run.

*Public service announcement: when using energy data about the U.S. to back up any argument, please avail yourself of the EIA. If you can’t find what you need, look again. Still not sure? Check a third time. The EIA is amazing. Use it.

Posted in 2008 Elections, Oil, Transportation | 2 Comments »

How, exactly, Iowa controls the world

Posted by Evan Herrnstadt on December 31, 2007

Although this is first and foremost an environmental economics blog, I’ve decided that it is my duty as a native Iowan to address the upcoming Caucuses. The need for such a post became evident to me when several discussions with highly politically literate friends revealed a widespread ignorance of the mechanism by which approximately 250,000 Midwesterners will significantly alter the course of U.S. politics. Preview: it’s completely crazy. Read the rest of this entry »

Posted in 2008 Elections, Iowa Caucuses | 2 Comments »

Bloomberg is audaciously hopeful

Posted by Evan Herrnstadt on December 14, 2007

In his speech at the Bali conference, Michael Bloomberg described a cap-and-trade system as vulnerable to “special interests, corruption, and inefficiencies,” and called for a tax in its stead. There have been numerous posts here at CT weighing the merits and deficiencies of taxes against those of a cap-and-trade system, so I’m not going to try to expand or improve upon those.

However, a major argument raised against a carbon tax is that of political intractability. Bloomberg attempted to address this major weakness of his policy:

He said most experts would agree that carbon taxes are “a very difficult political lift,” since they would probably boost costs for energy consumers. “But that’s what leadership is all about, and we need leaders around the world who get things done,” the New York City mayor said.

First off, a cap-and-trade, unless full auctioning occurs, is also likely to raise costs for energy consumers. Second, is it just me, or do politicians put far too much stock in their own ability to lead America to greatness? Obviously we need to elect people who have vision on important issues, but choosing realistic policies is also a big part of being an effective leader. Regardless, with Chris Dodd largely out of contention, it would be interesting to see Bloomberg jump in the Presidential race. He could inject the cap-and-trade vs. carbon tax debate into national politics. Jumping right to that dicussion in a general election (especially one in which two major candidates are discussing it) might cast mandatory carbon mitigation as an inevitability.

H/T: Mankiw.

Posted in 2008 Elections, Cap and Trade, Carbon Tax | 5 Comments »

Reagan was an, um, environmentalist

Posted by Rich Sweeney on December 3, 2007

In John McCain’s new “Environment” issue brief video he channels the legacy of Teddy Roosevelt and Ronny Reagan. (Actually the clip is funny because he says “Teddy Roosevelt was a great environmentalist, Ronald Reagan was a (verbal pause) environmentalist.”) Now usually I try to avoid politics on CT, but I thought this was a good time to bring up Ronald Reagan’s legacy on renewable energy. This may be old news to many of you, but I just learned recently that Ronald Reagan literally ripped the solar panels off the roof of the White House when he became president.

In the 1970′s the US faced an energy crisis due to the oil embargo. Under the Carter administration the US embarked on an unprecedented effort to reduce our dependence on foreign energy. One of the more ambitious areas of focus was on solar power, and, in addition to funding a massive amount of R&D and substantial tax credits for solar installation, Carter installed solar hot water heaters on the roof of the White House a sign of the nation’s intent.

Enter the actor from California. Reagan came into the White House and quickly cut funding for solar research and revoked the the solar installation tax credit (Evan has a good story about Reagan’s effect on the National Labs). Then, as a signal of his intent, he pried the solar panels off the roof and put them in the dumpster. 25 years later, we’re frantically scrambling to increase our national renewable capacity. Meanwhile, countries like Germany who invested heavily in solar in the past are acheiving impressive levels of renewables penetration.

Today, we’re lucky that Dutch’s old state, California, and companies like Google are picking up the slack. Nevertheless, Reagan’s pettiness and lack of foresight on this issue should be a source of embarrassment, not inspiration, for the current GOP candidates.

Posted in 2008 Elections, Government Policy, Renewables | 2 Comments »

A highly scientific study

Posted by Evan Herrnstadt on December 3, 2007

Total pages pertaining to energy/environmental policy on candidate websites:

Hillary + Obama + Edwards = 33

Giuliani + Romney + McCain + Huckabee = 6.

Posted in 2008 Elections | Leave a Comment »

The Economist weighs in on green protectionism and Reggie

Posted by Rich Sweeney on November 17, 2007

Here’s the first link. Unsurprisingly the magazine opposes any sort of green trade restriction. As I said earlier on this page, I’m pretty skeptical as well. My opposition was further solidified by all the anti-free trade rhetoric at this week’s Democratic debate. Not sure what happened to the Democrats over the past 7 years, but it sounded like most of the candidates on stage in Nevada would gladly levy us back to the Hawley-Smoot days. No need to give them more ammo on this front.

Also in this week’s Economist is a short piece on the Regional Greenhouse Gas Initiative (RGGI). The main point is that RGGI is going auction all its permits (good), but that there may be too many of them (bad). On the former point, I actually don’t know if this is settled in all ten states. On the latter, this is something PointCarbon published two months ago. Given that electricity usage is so dependent on the weather and emissions are so dependent on fuel prices, pegging reduction targets to a baseline year will always lead to some over- or under- allocation. Yet banking should mitigate the damage of this over time. Of course none of this would even matter if Congress ever got around to passing a reasonable climate bill. RGGI’s initial cap isn’t that strict, so a more ambitious national policy would probably prove binding, and the price of RGGI permits would go to zero.

Posted in 2008 Elections, Green Trade | Leave a Comment »

Celebrate clean coal, come on!

Posted by Evan Herrnstadt on November 16, 2007

I’d just like to point out that last night’s Democratic debate was sponsored by the coal industry. That might help explain this exchange:

WOLF BLITZER: All right, Senator, until there’s some new technological breakthrough, as you would hope and all of us would hope, where do you send the [nuclear] waste?

BARACK OBAMA: Well, right now, it is on-site in many situations. And that is not the optimal situation, Wolf. But don’t keep on assuming that we can’t do something. I mean, this is about the third time where you said, assuming we can’t do it, what’s our option?

BLITZER: Well, until we can…

OBAMA: But — but — but I’m running for president because I think we can do it. I reject the notion that we can’t meet our energy challenges.

BLITZER: All right.

OBAMA: We can, if we’ve got bold leadership in the White House that is saying we are going to do something about climate change, we are going to develop renewable energy sources. That’s what I intend to do as president.

BLITZER: Let…

OBAMA: And we shouldn’t, you know, be pessimistic about the future of America.

Nuclear is dangerous? Renewables are an audacious pipe dream? In such dire times, to whom can the American people possibly turn?

Taking off my foil hat for a second, I’d say the “highlight” of the evening was a clean coal commercial set to “Celebration” by Kool and the Gang. I’m considering advocating an immediate $500/ton carbon tax just so I never have to see that ad again.

Posted in 2008 Elections, Coal/ CCS, Nuclear | 1 Comment »

Obama and King Coal

Posted by Rich Sweeney on November 15, 2007

The tar sands article I just posted about also briefly mentioned the Coal-to-Liquid Fuel Promotion Act, introduced earlier this year by Jim Bunning and Barack Obama. This act would provide tax subsidies and loan guarantees for plants to invest in CTL. I knew that Obama was big on coal (he’s from Illinois), but I had forgotten about this specific bill when I posted on the energy platforms of the 08 front runners. While I’m all for letting the market decide which fuels we use once carbon restrictions are in place, subsidizing CTL now is insane. Especially given that there is still tremendous uncertainty as to if and where we’ll be able to capture and store carbon.

For me, this bill significantly undermines Obama’s green credentials. To steal a phrase from former Canadian Environmental Minister Charles Caccia, pledging to fight global warming on the one hand while subsidizing CTL on the other is “attempting to ride two horses galloping in opposite directions.”

Posted in 2008 Elections, Coal/ CCS | Leave a Comment »

Edwards’ ethanol guarantee

Posted by Evan Herrnstadt on November 12, 2007

John Edwards continues to develop his energy platform in his new “Plan to Build One America“. Specifically, he comes a step closer to advocating full auctioning of permits (quote from page 52):

Edwards will cap emissions of greenhouse gases and reduce them by 20 percent by 2020 and at least 80 percent by 2050. He will auction the right to emit any greenhouse gases after a short transition period.

His overall plan retains many of the vague gimmicks noted by Rich in his earlier, more comprehensive post on the Democratic front runners, such as establishing a Green division of Americorps. He also still loves his command-and-control measures, many of which have questionable value:

Require oil companies to install biofuel pumps at 25 percent of their gas stations and require all new cars sold after 2010 to be “flex fuel” running on either gasoline or biofuel.

One policy I found particularly interesting is a plan to offer loan guarantees to new ethanol refineries. Under such a scheme, the government essentially co-signs a loan. There are two sides to this policy. On the one hand, by overcoming information asymmetries in the credit market, the government can help allocate credit to unproven but promising projects. This theoretically releases societal benefits that would have otherwise gone untapped. On the other hand, there is the issue of moral hazard; those partnering with the government are more likely to take on excessively risky projects.

Loan guarantees have been used to underwrite coal gasification, ethanol, and geothermal projects in the past with varying levels of success. Of the three ethanol projects, two defaulted and were sold for salvage, while one defaulted but became a major ethanol producer after extensive refinancing.

However, the point of a loan guarantee is to fund a large project with a huge amount of associated risk. At this point, are ethanol plants really the sort of thing the government ought to be cosigning on? They seem to be a pretty proven investment at this point (especially if Edwards mandates that all cars be able to use E85 after 2010 and oil prices continue on their way up). Perhaps loan guarantees would be more appropriate for truly risky, potentially revolutionary technologies such as CCS coal or tidal energy.

Posted in 2008 Elections, Biofuels, Cap and Trade, Government Policy | Leave a Comment »

You keep on using that word. I do not think it means what you think it means.

Posted by Daniel Hall on November 6, 2007

Presidential candidate Hillary Clinton has released her energy and climate plan. I expect one of my co-bloggers will be along at some point with a more comprehensive analysis that will serve as an update of his previous analysis of the leading candidates’ energy plans. I want to deal in this post with reaction in the blogosphere to her promise to auction of 100% of the emissions allowances in a cap-and-trade program. Over at Gristmill David Roberts says:

I was just on a conference call with the Clinton campaign’s energy advisors, who were answering questions from the press. …

[The advisors said,] “the cap-and-trade program would produce assistance for energy-intensive industries.”

Now, as you know, the criticism of giving away permits under a cap-and-trade system is that it would produce windfall profits for polluters. By auctioning all permits, Clinton has seemingly avoided this criticism. But if she takes the auction revenue and then … gives it to polluters, well, she’s just hidden the windfall profits, not eliminated them.

Let me state first off that in general the idea of auctioning allowances rather than giving them away is a very good one. Auctions generate government revenues which can (hopefully) be put to good use, and by auctioning allowances rather than giving them away you diminish the opportunities for rent-seeking.

BUT… this term “windfall profits” has gotten thrown around a lot since the EU gave away most of the allowances in its Emission Trading Scheme (ETS) and the electric power companies subsequently all made a lot of money, and there seems to be a lot of fuzzy thinking about what windfall profits are, who might get them, and what the implications are for allowance allocation. The upshot is that while using an allowance auction is generally a very good idea, it will likely be helpful to freely allocate some allowances to a few industries which face strong international competition.

Read the rest of this entry »

Posted in 2008 Elections, Cap and Trade | 7 Comments »

Dodd cites the Pigou Club at debate

Posted by Evan Herrnstadt on October 30, 2007

Chris Dodd just used N. Gregory Mankiw to shame his opponents for not supporting a carbon tax.

Posted in 2008 Elections, Carbon Tax, Government Policy | Leave a Comment »

Energy/ Environmental platforms of the ’08 front-runners

Posted by Rich Sweeney on October 12, 2007

Last weekend Barack Obama released a long, detailed energy/ environmental platform to much political fanfare. After reading it I decided to finally check out Hillary and Edwards’ plans for comparison purposes. If you’re of voting age and read this blog then I definitely encourage you to read each plan for yourself. In the meantime however, I’ll summarize some of the highlights and potential lowlights below.

** Note that this post only looks at the Democratic front runners. I went to the websites of Giuliani, Thompson and Romney and let’s just say that environmental policy clearly isn’t a “key issue” for the GOP at this point. Giuliani has come out in the debates as being pro-nuclear. Other than that, any mention of energy policy is in the context of energy security, and usually amounts to simply opening up untapped domestic oil.

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Posted in 2008 Elections, Government Policy, Political Economy | 9 Comments »

 
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