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'Carbon Pollution' and Wealth Redistribution

Wednesday, June 26, 2013

President Obama’s recently proposed policies will do little to combat climate change — but they will do much for his political and economic objectives.

No crisis should go to waste, an eternal truth highlighted in bold by a purported climate change apocalypse that is now the target of actions newly proposed by President Obama. This so-called “crisis” will flood not various coastlines, but instead the front pages, replacing other, less flattering political headlines for the administration.

And if the proposed actions offer the potential of sizeable wealth transfers to political allies? That is far more than mere icing on the cake. Whatever the weakness of the evidence on greenhouse gases (GHG) and climate effects, the real goal of carbon policy is a regional redistribution of wealth, a reality that explains the inability of Congress to enact such policies since the Clinton administration, when a “Sense of the Senate” resolution rejecting the Kyoto Protocol was approved by a margin of 95-0. President Obama too was unable to convince even a fully Democratic Congress to adopt such policies, and so he now proposes that his Environmental Protection Agency and Department of Energy implement regulations reducing emissions of carbon dioxide and other greenhouse gases (GHG).

The President’s Plan

Let us begin with a summary discussion of the president’s three broad proposals: the imposition of a GHG emissions standards on both new and existing electric generating plants; expansion and tightening of energy-efficiency standards for buildings, appliances, and some vehicles; and an increase in (subsidized) renewable power generation from federal lands. The first proposal, the imposition of a GHG emissions standard on power plants, means in a nutshell that no new coal-fired plants will be built, and that some existing coal-fired capacity will be shut down. The cost data from the EIA suggests that future competition between new coal and natural gas power plants will be driven heavily by the relative costs of coal and natural gas, both of which are uncertain. For the government to impose such a solution in place of market forces requires a rationale — the purported effects on climate change — that is very far from obviously correct, as discussed below. With respect to the substitution of gas-fired generation in place of existing coal-fired plants, much hinges on how the regulations are written and implemented; but the EIA data suggest increases in operating costs alone of up to 60 percent.

The president’s speech seems to imply that 'energy efficiency' somehow is free.

The president’s speech seems to imply that “energy efficiency” is somehow free. That is, that it's easy to achieve reductions in energy use without causing a reduction in the benefits from energy use. Were that the case, one wonders why market forces do not lead to such outcomes themselves. In reality, energy efficiency requires the substitution of capital, or the acceptance of less safety and comfort, or other adjustments, the net virtues of which government officials and experts simply are not in the best positions to evaluate. There is also the “rebound” effect: if vehicles and appliances use less energy per unit of output, a natural market response is to use more of them and to use them more intensively. The net result: far less energy savings than usually are asserted, and thus a lower economic return to the investments made in efficiency.

With respect to the proposed expansion of renewable energy production: wind and solar power receive subsidies per kilowatt-hour vastly larger than those purportedly received by conventional generation, and it remains the case that renewables simply are uncompetitive, in substantial part because the energy content of wind and sunlight is too diffused to be useful without massive capital investment. For a discussion of the economics of renewable power and the weakness of the arguments in support of policies subsidizing it, see this AEI report. 

Reviewing the Climate Change Evidence

Let us turn now to the recent evidence on whether an anthropogenic climate crisis indeed looms large. There has been no temperature trend over the last 15 or so years despite increasing atmospheric concentrations of carbon dioxide and other GHG. This record has belied the predictions of the climate change models, yielding some uneasiness among the proponents of the conventional view. More generally, the earth has been emerging from the Little Ice Age since roughly 1850. Accordingly, there has been an upward long-term temperature trend: temperatures increased from about 1910 through about 1940, were roughly constant through about 1980, increased until 1998 (a year with a strong El Niño), and have exhibited no trend since then. How much of this long-term upward trend is anthropogenic? No one knows, and those who claim to know… don’t.

The past 12 months have set a record for the fewest tornadoes ever in a similar period, and there has been no trend since 1950 in the frequency of strong (F3 to F5) tornadoes in the United States. The number of wildfires is in a long-term decline; it is our misguided refusal to thin underbrush in government forests that has exacerbated the large-scale fire problem. As of June 1 (the outset of the Atlantic hurricane season), it has been over seven and a half years since a Category 3 or higher hurricane landed on the U.S. coast; such a long period devoid of an intense hurricane landfall has not been observed since 1900. With respect to the worldwide data on hurricane basins, there has been no trend in the frequency or intensity of tropical cyclones over the last 70 years. A widely accepted and documented measure of tropical cyclone energy is near its lowest level since reliable measurements began by satellite in the 1970s. An increase in such hurricane activity in coming decades is far more likely to reflect a reversion toward the mean rather than the effects of GHG concentrations. There is no long-term trend in sea level increases despite rising atmospheric concentrations of GHG. The record of changes in the size of the Arctic ice cover is far more ambiguous than generally asserted. The Palmer Drought Severity Index shows no trend over the record period beginning in 1895 in terms of drought; more areas in the United States have experienced an increase in soil moisture than a decline. Flooding in the United States over the last 85-127 years is not related statistically to increases in carbon dioxide concentrations.

Like the environment, our institutions also can be 'polluted.'

There is the further matter that U.S. emissions of GHG are about 17 percent of global GHG emissions, a proportion that is declining steadily. And so it is unsurprising that nowhere in the president’s speech did he offer an estimate or even an assertion about the climate benefits to be expected from his policy proposals. If we apply the widely accepted MAGICC climate model developed at the National Center for Atmospheric Research, and if we assume the United Nations’ Intergovernmental Panel on Climate Change (IPCC) midrange emissions path, an immediate cut in U.S. emissions by half would yield a reduction in global temperatures of 0.1 degrees Celsius 100 years from now. Because annual temperature variability is greater than that figure, the predicted effect cannot be measured reliably. Note that a 50 percent reduction in U.S. emissions could be achieved only in the face of massive economic dislocation. 

More crudely, the IPCC’s “best estimate” is about 3 degrees Celsius for the temperature effect by the year 2100 of a doubling of carbon dioxide concentrations. (A growing body of peer-reviewed literature suggests that that estimate might be too high). The U.S. contribution of 17 percent suggests, roughly, that the United States would contribute about 0.5 degrees. Suppose that the president’s new policies were to reduce our emissions by half. The reduction in the U.S. temperature contribution would be about 0.2-0.3 degrees, any effects of which would not be measurable. Surely even President Obama would not suggest that his proposals will be costless; if there are no measurable benefits, then there is no justification for implementing them unless one believes that an international agreement remains a plausible goal. The record of the United Nations Framework Convention on Climate Change should be sufficient proof that such an agreement remains a mirage, in substantial part because increased energy use — and emissions of GHG — is the sine qua non of economic growth and the third world’s escape from grinding poverty.

Science is the application of data to the predictions made by scientists using analytic tools or models. Because the evidence in support of the conventional view is so weak, proponents of climate policies have been reduced to the invocation of anecdotes, and the predictions made by various computer models. The models, however, are far less useful than commonly assumed. None can explain, for example, the warming that occurred around a millennium ago, or the Little Ice Age, or the subsequent patterns after 1850. All climate models predict that anthropogenic warming should create an enhanced heating effect in the tropical mid-troposphere; but neither the satellites nor the weather balloons can find it, a reality that raises serious questions about our understanding of the underlying atmospheric physics. In short, the climate models can explain neither the past nor the present. It is far from obvious that policymakers should have faith in their predictions about the future.  

The Central Motivation: Wealth Transfer

What is clear, on the other hand, is that government is an engine of wealth redistribution. Policies making some energy sources more expensive inexorably will create such redistribution because states and regions differ in the proportions of their energy use derived from alternative technologies. In particular, the president’s proposals will penalize areas and industries disproportionately dependent on coal-fired power. A recent MIT study concludes that under a policy to reduce GHG emissions "California, the Pacific Coast, New England, and New York generally experience the lowest cost…while the South Central [Arkansas, Louisiana, and Oklahoma], Texas, and Mountain States face the highest cost."

That conclusion is consistent with the data on average retail electricity prices reported by the EIA, as summarized in the following table:

                                             .Zycher Chart Obama Plan 2

The winners are states with high power costs or with significant inexpensive hydroelectric resources that would be unaffected by GHG policies. The losers are states with low power costs driven by disproportionate use of cheap, coal-fired power. By driving power costs up in the latter group of states, the GHG policies would reduce the competitive disadvantages of the former group.

The policies examined in the MIT study surely differ from those that will emerge from the regulatory processes given force by the president. But if the effect of the latter is some substantial reduction in GHG emissions, in particular from electric power generation, then it is difficult to see how the distributional impacts might differ substantially from those reported by MIT, and it also is difficult to believe that the basic red-to-blue transfer is accidental. Instead, given that the actual climate effects of reductions in U.S. emissions would be trivial, it is straightforward to hypothesize that the direction of the wealth transfer is the central motivating objective of this policy proposal.

The climate models can explain neither the past nor the present. It is far from obvious that policymakers should have faith in their predictions about the future.

Congressman Henry Waxman, the ranking Democrat on the House Energy and Commerce Committee, argued recently that “It's important for the president to act because the Congress is still denying the science and is not about to pass any legislation. The president has broad authority to accomplish many reductions through regulation on his own, without Congress.” Whether the president in reality has that authority is an issue that is certain to occupy the courts. But the implementation of policies and other measures not approved by Congress is deeply problematic in the context of the separation of powers and technicalities such as the consent of the governed. Like the environment, our institutions also can be “polluted,” an outcome to be resisted regardless of the assumed merits of the policies themselves.

In Hollywood, there’s no business like show business. Inside the Beltway, there’s no show like the business of sound-bite showboating. In the president’s speech there appears the phrase “carbon pollution” no fewer than 30 times. In the Orwellian language of the environmental left, “carbon pollution” is carbon dioxide — a natural substance that is not toxic to humans at many times greater than current ambient concentrations and that protects plants from various environmental stresses. It is unlike any other effluent regulated by the EPA for which less is better. Too little carbon dioxide would make life difficult, and in the extreme case, the Earth uninhabitable. That obviously will not be the result of the president’s proposals if implemented. But the large expansion of government power and centralized planning authority inherent in the proposals is not an end to be pursued.

Benjamin Zycher is a visiting scholar at the American Enterprise Institute.

FURTHER READING: Zycher also writes “Would a Carbon Dioxide Tax be ‘Efficient’?” and “Earth Day and Four Decades of Fear.” Kenneth Green describes “The Continuing Failure of Green Conceit” and takes on the task of “Dissecting the Carbon Tax.” Mark J. Perry opines “Natural Gas and Nuclear Power Need to Share the Lead in Power Generation for the Future” and joins Thomas A. Hemphill to explain “How Obama’s Energy Policy Will Kill Jobs.” James Pethokoukis wonders if it’s “Time for the GOP to Take the Lead on Climate Change?” while Andrew Rugg blogs about “Natural Gas: The Free Agent of Energy Sources” and Jonah Goldberg writes “All (Green) Thumbs.”


Image Credit: Dianna Ingram/Bergman Group; Photo by Maddrat/Shutterstock


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