Celebrating Earth Day...The Right Way

April 17, 2009 in Blog

Next Wednesday, April 22, is Earth Day and we are celebrating in proper style. Join us at Rachel Carson Elementary School in Sammamish at 6:30 to see "Not Evil Just Wrong: The True Cost of Global Warming Hysteria," an excellent film about the costs of thoughtless environmentalism.

The film is the second documentary by journalists Phelim McAleer and Ann McElhinney. Two years ago they joined us as keynote speakers for our environmental luncheon when they showed clips from their first film, "Mine Your Own Business."

The film highlights the high cost of the ban on DDT and the millions in Africa and Asia who have died from malaria as a result. Two years ago, the World Health Organization, saying they could no longer ignore the science, approved the use of DDT as a tool against malarial mosquitoes. The film combines interviews with scientists, environmental activists and average citizens to raise concerns about the current wave of regulations and taxes being proposed to fight global warming.

You can see clips of the film at the Not Evil Just Wrong Youtube site or watch the preview below.

The private screening is the first in the Seattle area and is free. Please RSVP by calling (206) 963-3409 or lleveque [at] washingtonpolicy [dot] org">lleveque [at] washingtonpolicy [dot] org.

Money (and Green Jobs) for Nothing

April 6, 2009 in Blog

Today, Rep. Hans Dunshee will announce his $3 billion spending plan for "creating jobs by funding construction of safety, health and energy-saving improvements to public facilities." The goal is apparently to provide spending similar to the federal "stimulus" package. Since the state budget must be balanced, however, the money must be bonded as future debt to be paid by taxpayers.

If the bill passes the legislature it would go to the public in November.

The sponsor claims that the bill will pay for itself. Half of the energy savings from spending on energy efficiency in public buildings will be placed into an account to pay off the bond. Further, he says that the bill would create 90,000 jobs, although he does not say how long each of those jobs would last or describe the quality of those jobs.

Several questions and challenges come to mind.

  • Past claims of energy savings have proven false. In 2005, Rep. Dunshee predicted that his legislation requiring schools to meet "green" building standards would reduce energy costs by 30 percent. Our research in the four years since the bill passed shows that green schools don't reduce energy costs and, in many cases, actually increase them. The Superintendent of Public Instruction recently admitted that the data do not support the previous energy savings claims.
  • Some energy efficiency projects are extremely expensive. When the City of Seattle looked at putting solar panels on Qwest Exhibition Hall, officials estimated that the project would break even only after 40 years. If money is spent for inefficient, but politically popular, projects the return on investment will be low or negative.
  • Most of the funding will likely come from increased taxes. Of the $3 billion budgeted, only $500 million applies to the "Washington Works"account created to capture half of the energy savings. To cover the full $3 billion, those expenditures would have to yield a more than a 12-to-1 return on investment. This is optimistic in the extreme. For a 20-year bond, excluding interest costs, this is about the pace of the growth of Google's stock price since its IPO in 2004.
  • The bill assumes school districts are mismanaging their schools. Undoubtedly school district officials will support this bill. Who can resist the temptation of free money, especially in tough times? The assumption of the legislation, however, is that there are massive energy savings to be had that are simply being ignored by school districts. Some districts may make this mistake, but my experience in speaking with facilities directors at school districts is that they know their buildings very well and identify opportunities for energy savings quickly.
  • It is unclear how energy savings would be counted. Schools and universities could come to regret taking the money if the accounting of energy savings is expansive. One-half of the energy savings will be returned to the state to pay off the bonds. Determining, however, what are actual savings may be difficult. This will involve establishing a baseline of energy expenditures for each building when energy costs can vary from year to year for a variety of reasons. It will also involve determining why any energy savings against that baseline occurred. Was it a mild weather year? Did teachers turn out the lights? These are not trivial considerations. One "green" school found that the temperature preference of the principal increased energy costs by thousands of dollars. Will they claim energy savings, and therefore payments, even if costs go up, arguing that costs would have been even higher? The City of Seattle made exactly this argument when !
    it turned out that the new "green" City Hall actually used more energy than the old one. Charging school districts in that circumstance could add insult to injury.
  • It could pit schools and universities against the state. Further, since part of the savings associated with state spending would have to be paid to the state, school districts will have an incentive to minimize the claimed savings. The state, on the other hand, trying to claw back as much as they can, will want to exaggerate the savings. Who wins this accounting tug-of-war will determine whether schools are winners or losers in this program.
  • What happens if cost-effective projects aren't found? Any effort to spend a certain amount of money is likely to breed waste. At the end of each biennium, afraid to lose remaining funds, agencies find ways to spend them. It is likely that this program will see a similar rush to spend, regardless of the utility of projects. The money offered in this program doesn't expire, so it will be used for increasingly inefficient purposes. There is no standard for return on investment, only the requirement that the money be spent. It is likely that the return on investment of some projects will be negative, spending ten dollars to save one. This is a good deal for those who receive the money. Since taxpayers, not the districts or other beneficiaries, are liable for the costs, any new savings, however meager, is found money. Thus, districts will be happy to put forward any project that saves even $1 a year because they receive at least half of the bene!
    fits and none of the costs.

We've addressed the "green jobs" ecofad in the past. Additionally, the goal of government spending should not just be to create jobs, but to create prosperity. For example, which makes more sense, 1) a project that generates 1 MW of energy and creates 10 jobs, 2) a project that creates 1 MW of energy and creates 100 jobs, or 3) a project that creates no energy but creates 500 jobs? If jobs are the goal, we could simply pay people to dig and fill in holes.

Ultimately the quality of the project is the key. We want to create productive jobs, not make-work jobs. This is especially critical since the funding for those jobs will come from businesses who are already creating jobs. An unproductive "green" job is worse for economic recovery than a productive job in another sector like health care.

We'll see how many of these questions are answered when the proposal is formally unveiled today.

You Can't Predict the Future. But I Can. With Your Money.

April 2, 2009 in Blog

The latest version of the state's climate change bill, E2SSB 5735, includes a number of efforts to favor the technologies politicians believe will be the key to reducing CO2 emissions in the future. The bill calls for creating an "alternative fuels corridor" using government funding and property. In building the corridor, the Department of Ecology will:

Limit renewable fuel and vehicle technology offerings to those with a forecasted demand over the next fifteen years and approved by the department;

To understand what a fool's errand this is, think back fifteen years, to 1994. California was trying to mandate all-electric vehicles, an effort they abandoned in 2007. Hybrid vehicles were unknown. Today, every car company offers hybrids and the Prius outsells the most popular SUV.

Only three years ago, legislators argued that biofuels were the carbon-free fuel of the future. Today that view seems naïve as the biofuel industry struggles and studies show significant costs and carbon emissions associated with the most popular biofuels. The pace of technological change is remarkable and predicting the future is extremely difficult.

Ironically, one of the advocates of the bill agrees.

The Sightline Institute, one of the more thoughtful environmental groups, falls into the trap of believing it can predict the future while criticizing opponents for believing the same thing. In a recent blog entry, they criticize opponents of the President's stimulus package, saying:

Everyone knows something about the bailouts, Obama's "handling" of the economy, how health care will play out, or the timing of federal climate policy. Note to everyone: shut up ... But whatever else you may know, you do not know what will happen in the future.

The irony is that while criticizing others' inability to predict the future, the climate policies they advocate expressly rely on the ability of politicians to predict what technologies will be viable in the future and spend taxpayer money on that bet. The problem is that politicians are very poor at this and fail again and again as evidenced by their support of all-electric vehicles, hydrogen vehicles and biofuels. As a result, politicians, unsure of where to place their bets, bet on every number on the roulette table. They lose large amounts of money on every spin, but can always claim to have picked the winning number. Uncertainty breeds bad decisions.

How do you address this uncertainty? Sightline argues that since the market doesn't always work perfectly, government must step in:

The only sensible thing to do when you see something that's clearly, inherently unsustainable is to do your best to stop it before someone gets hurt. ... Unsustainable things will stop, by definition.  Once we come to grips with that fact, we can start planning a smoother and more gentle transition to a set of expectations, and way of life, that can really last.

In other words, we cannot predict the future, but when politicians see something they believe to be unsustainable, they should step in and stop it, using government planning. What if politicians guess wrong? What if they can't predict the future? There are two ways to deal with this uncertainty.

We can distribute power and hold those who make poor decisions responsible for those decisions, like in the market. Or we can consolidate power and separate decisionmakers from the consequences of those decisions. If individuals make bad decisions in the first approach, they bear the burden and the consequences are distributed. If politicians make bad decisions in the second scenario, the consequences are multiplied by the consolidation of power and the burden is borne by taxpayers.If politicians choose wrong, as they almost certainly will, when it comes to climate change spending, we will find ourselves years from now with higher carbon emissions and having wasted billions.

If we create a broad incentive to reduce carbon emissions, like a stable carbon price, millions of Washingtonians will take large and small steps. Some will succeed and some will fail. The competition of the market, however, will produce the most efficient and effective solutions as it did when it favored hybrids over the government selected all-electric vehicles. Those who fail will have done so with their own money. Even if most choose wrong, those who choose correctly will benefit and spread their innovation.

The future is uncertain, and there are ups and downs. But consolidating power in the hands of politicians turns ordinary risks into all-or-nothing bets, betting taxpayer money on their ability to do something they admit they cannot – predict the future.

Distributing power limits the cost of bad decisions and increases the diversity of thought and creativity that is critical to finding the technological solutions that are at the center of all environmental solutions.

North Korea Appreciation Day

March 27, 2009 in Blog

KoreaREU121006_548x700 Tomorrow is North Korea Appreciation Day, sponsored under a different name by environmental group WWF and endorsed by UN Secretary General Ban Ki Moon and many others. Remember to turn your lights out tomorrow in honor of the example set by that country.

Secretary Moon is from South Korea. Looks like his country has some work to do.

A Smooth Transition

March 26, 2009 in Blog

With the closure of the P-I, a number of reporters are looking for jobs. Two environmental reporters have a new employer.

Seattle environmental think tank Sightline announed that the two will now be working there. They noted on their blog: "In addition, two veteran reporters from the Seattle Post-Intelligencer -- Jennifer Langston and Lisa Stiffler -- will be teaming up to edit our Sightline Daily news service."

The transition from environmental reporter to environmental advocate should be seamless.

In one of Stiffler's last blog entries at the P-I, she lamented having even reference those who disagree with her, noting "I hesitate to give even virtual ink to the more extreme climate change naysayers" when talking about a conference in New York of climate scientists who disagree with the projections of climate alarmists.

Two years ago, she and another P-I environmental reporter bragged about an award they received. They noted that "we were awarded the Warren G. Magnuson Puget Sound Legacy Award by the environmental activism and education group People for Puget Sound." They promised that they wouldn't "hang up our, uh, keyboards and declare victory." They didn't say what "victory" looked like for reporters. Interestingly, the blog entry was circulated at the Seattle Times to reinforce their rules against reporters accepting awards from groups they cover.

Langston covered a number of environmental issues, including this unintentionally humorous story about a couple who made a "zero-carbon" move.

When addressing environmental issues, many wonder whether the news they read is being presented in thoughtful and complete manner. When reporters transition so quickly and easily to the payrolls of groups they previously were "objectively" covering, it adds to these doubts.

Double or Nothing on 2020?

March 24, 2009 in Blog

Noted environmental doomsayer Paul Ehrlich said in 1969 that "I would take even money that England will not exist in the year 2000." Turns out that this, like all of his other claims, was incorrect.

However, a member of British Prime Minister Gordon Brown's team is looking to come to Mr. Ehrlich's rescue.

Jonathon Porritt, an environmental advisor to Brown will argue this weekend that Britain's population must be cut in half to remain sustainable. Says Mr. Porritt, "Each person in Britain has far more impact on the environment than those in developing countries so cutting our population is one way to reduce that impact."

I've always thought the British were extremely hospitable. No matter how crazy the idea or how much time has passed, Brits will attempt to accommodate the ravings of foreign gadflies. In this case, however, we wouldn't mind if they ignored Mr. Ehrlich. After all, it's what we do.

Belated Prematurity

March 16, 2009 in Blog

Last Saturday, the Department of Ecology responded to my editorial in the Spokesman-Review noting that Washington's "green" schools are failing to reduce energy use. Two things are interesting about their response.

First, they made a dramatic change in their position on energy savings. Previously they claimed that "green" schools were saving up to 50 percent in energy costs, claiming that one school in Spokane was saving $40,000 per year -- which would have been a greater than 90 percent energy savings.

Now, responding to my data showing the schools use more energy than recent non-green schools, they argue something different.

Such claims are premature and, to date, unfounded. The fact is that we are still collecting data from the schools that volunteered to participate in the program’s early phases. Many of these schools opened just this past September.

After four years of claiming that "green" schools save energy, they belatedly call such claims premature. It is true that some schools have just opened, but many schools have been open for a few years, and they are the only schools we use to test energy savings. This is a strong indication they are backing away from the claims they made to help pass the legislation.

Ecology's editorial also cites the health of the students as another reason to support "green" schools.

In Washington state alone, more than 500,000 people have asthma, including 125,000 children. In Spokane County, about 40,000 adults and children have been diagnosed with asthma. Total direct medical costs for asthma reach $240 million each year in our region. How we build our schools matters. Creating healthy schools is a big part of what the High-Performance Schools Protocol – also known as the Green Schools Program – is trying to address.

The key word is "trying." Improving indoor air quality is an important goal, but there is no indication here that Washington's green schools are helping achieve that goal. In fact, the data show that absentee rates in Spokane's three green schools are virtually identical, slightly higher actually, than the district as a whole. Ecology needs to offer data that "green" schools are actually helping achieve these goals. They have not. They simply argue that the goal is worthwhile.

If their new position is we don't know whether "green" schools work, then it would seem to make sense to give the schools time to collect data. Why not suspend the regulation until we can be sure the extra cost for these buildings is worthwhile? At this point, supporters of keeping these costly standards can only say "trust us."

Ad Hoc Environmental Economics

March 13, 2009 in Blog

A lot of economic claims are thrown around regarding the state's efforts to address climate change. One good way to determine the validity of those arguments is to see if they are used in contradictory ways.

One such example is on display in today's Seattle P-I. In the article, environmental activist Becky Kelly argues that "We have a lot to lose by inaction. And we have a lot to gain by leadership." What we have to lose and gain she does not explain. In the past, advocates of the climate change legislation moving through the legislature have argued that by enacting regulations today, we will create more jobs here than if we let others pass climate legislation first.

That logic, however, is contradicted by the very text of the legislation. The new version of SB 5735 contains the following language, requiring an economic analysis that looks at "How to address trade competition from countries and states that are not participating in an emissions reduction program." This recognizes that enacting regulations here provide incentives to move carbon-emitting activities and business elsewhere.

This contradicts the above logic which argues that regulating here, early, will bring jobs to Washington. It demonstrates that the argument made by Becky Kelly and others who demand "leadership" makes no sense. The very need to appeal to "leadership" indicates that other arguments are inadequate to win the point. Being a leader in adopting bad legislation is not something to brag about.

Further, adding costs and regulations, as envisioned by the environmental community, hinder business development. They may not care because they believe the cost is worth achieving their environmental goals, but they cannot argue such policies are good for business. The language of 5735 admits as much.

If we really cared about jobs, we would let others create the demand by passing regulations and we would create the supply by passing tax cuts and business incentives to develop companies that meet the demand elsewhere.

For instance, if Seattle mandates that every home install solar panels, there is no reason to believe that those solar panels will be manufactured in Seattle, especially if energy costs are high and business regulation is tight. It is more likely that other communities will build industries that benefit from Seattle's regulation. Seattle's leadership will create higher costs for their residents and jobs for others.

If Washington wants to lead, it should lead in policies that encourage supply. The regulations being proposed, however, lead in creating demand for products that can easily be produced elsewhere.

Environmental advocates know this. That's why the language is in the bill. They hope, however, reporters and the public won't question their claims about "leadership" and that they will end up believing that regulating first will somehow create jobs here.

Everything is Local for Somebody

March 11, 2009 in Blog

An ironic story in Crosscut talks about the number of "buy local" organizations popping up across the country. The purpose of these organizations is to make sure that none of the members of our buy local effort buy from any of the other buy local efforts. They're not local.

Such buy local efforts are silly for a number of reasons.

First, I don't like the us-vs-them attitude inherent in buy local efforts. I may root for the Huskies over the Cougars, but I'll buy Cougar Gold cheese because I like it and I tend to believe that my personal superiority over Cougars is limited to my choice of schools. Otherwise, I see no reason that I should choose someone from Seattle over someone from San Francisco, Lubbock or anywhere else. Any campaign to "support our own" is fraught with the definition of who is like us. That hasn't always been a positive impulse in history. This is more about excluding other communities than building your own.

Second, buying local doesn't mean it uses fewer resources or is good for the environment. Milk produced in King County may use more energy than milk produced in Yakima. More fuel is used shipping feed from Eastern Washington to King County cows than is used shipping milk from Yakima to King County consumers. Numerous studies demonstrate that distance between the producer and consumer doesn't always reflect the use of resources. In many cases, longer distances are also more "sustainable."

Third, for many buy local advocates, "buy local" means little more than "buy from me, not my competitors." One builder quoted in the article is excited about "buy local" because he is "working on how to approach weatherization, retrofitting and other items in Obama's package." In other words, he's excited about government programs that favor him. I am shocked.

Another "buy local" advocate in the story is a local book seller. His commitment to "buy local" appears to be based solely on his desire that people buy from him rather than Amazon or Barnes & Noble. On the book store's web page, the book seller lists his five favorite books. None of them is by a local author and certainly none of them are printed locally. He wants you to buy books that have been written and printed elsewhere and shipped to him rather than buying books that have been written and printed elsewhere and shipped directly to your home or to a major bookseller.

Some argue that local food tastes better. Others argue that local booksellers or hardware stores offer better service. Fine. In those cases, however, people aren't buying the "localness," they are buying taste or service. If those things are true, there shouldn't be a reason to start a "buy local" campaign. Too often, "buy local" is a misleading surrogate for other values. Worse, activists then look to government to mandate "buy local" rules, provide subsidies and other taxpayer-funded preferences that force consumers to adhere to the values of a few.

In the end, people should be free to buy what they want, whether their priority is taste, service or price, whether they get those attributes from a product made locally or elsewhere.

Shucking and Jiving: A Video Representation

March 9, 2009 in Blog

Bjorn Lomborg, last year's keynote speaker at the WPC environmental conference, has been trying to get Al Gore to debate the pros and cons of climate policy for years. Lomborg finally got a chance to ask a question of the former Vice-President at the Eco:Nomics conference in Monterrey.

Two things of note.

First, Gore refuses to answer the question of whether addressing climate change does more to improve human wellbeing than other policies, such as fighting malaria. He cites "scientists," but never mentions economists or any analysis of where limited resources are best spent. Which is better -- cap-and-trade or a stable carbon price? Should we spend money on stopping AIDS or expanding public transit? These are not scientific questions. They are questions of economics and values.

Second, he continues to ignore, and distort, the climate science while claiming to listen to scientists. At the end of the video, Gore says that for each 1 meter of increase in sea level there will be 100 million "climate refugees." This is wrong on two counts.

First, the UN agency on climate change, the IPCC, projects just over 1 foot of sea level rise during the next century. One meter is more than double the projection. So, Gore chooses an extreme example but passes it off as reasonable.

Second, this assumes that people would not move or adjust to the rise in sea level. As Lomborg mentioned in his speech last year, sea levels rose about a foot during the last century and we didn't notice it. It seems absurd to think that an addition 12-16 inches over 100 years would cause chaos.

Here is Gore ducking those key issues:

Obama Budget Director v. Washington Department of Ecology

February 20, 2009 in Blog

Washington State Ecology Director Jay Manning today told KUOW that cap-and-trade is "the most flexible and efficient way to reduce [carbon] emissions." He is pushing the legislature to adopt such a system in Washington.

I disagree that cap-and-trade is the most efficient way to reduce emissions. And I have friends in high places.

President Obama's Budget Director Peter Orzag has argued repeatedly that a stable carbon price, a tax on carbon-emitting energy, is more flexible and efficient (not to mention transparent) than cap-and-trade. Here's what he said in November of 2007 when he ran the Democrat-controlled Congressional Budget Office:

From that perspective, a tax has an important advantage: It allows more emission reductions to take place in years when they are relatively cheap. Various factors can affect the cost of emission reductions from year to year, including the weather, the level of economic activity, and the availability of new low-carbon technologies (such as improvements in wind-power technology). By shifting emission reduction efforts into years when they are relatively less expensive, a tax can yield a given quantity of emission reductions at a lower cost than can a cap-and-trade program with specified annual emission levels. In addition, by avoiding the potential volatility of allowance prices that might result from a rigid annual cap, a tax could be less disruptive for affected companies. Provided that the tax was set at a level that reflected the expected benefit of reducing an additional ton of CO2 emissions, the tax would provide a motivation for firms and households to reduce emissio!
ns up to the point at which the cost of doing so was equal to the resulting expected benefits.

The simple truth is that the economic impact isn't the primary concern of Manning and others who support cap-and-trade. They care primarily about the cap because they believe it guarantees a reduction in carbon emissions. This guarantee has proven to be false in Europe.

Manning and others should simply say they prefer the security of a cap, even if it is ephemeral, to the uncertainty of a system without a hard mandate. The problem is that in these economic times a glib approach to the costs of the system is no longer credible. That doesn't justify, however, mischaracterizing the facts about the economic impacts of cap-and-trade.

More Stimulating This Year than Last

February 13, 2009 in Blog

One year ago, in response to President Bush's stimulus proposal, I asked the question, "Is Government Spending Good for the Economy?" I expressed skepticism, saying:

...stimulus checks without spending reductions and government spending are similar. Both take money from people in the form of taxes and then put it back into the economy in the form of rebates or government spending. Rebates are better because they go where the economy needs it most (i.e. where demand is high) whereas government spending goes where politicians decide.

At the time, the Seattle Times agreed, saying in an editorial:

In fact, the economy is not a mechanism operated by the president. It is all of us, earning, spending, saving and investing. ... These problems are not going to be fixed with $500 checks. They will be fixed by people cutting their losses, replenishing their savings, adjusting their attitudes about risk and making better decisions.

They seem to have had a change of heart, however. Here's what they said today about President Obama's stimulus package, the economy and by whom it is operated:

A welcome jolt for Washington jobs.
The economic-stimulus package up for a final vote in Congress will infuse the Washington economy with money for jobs, infrastructure improvements and funds for a variety of assistance programs. A welcome jolt of help as the contours of an economic crisis are revealed. ... Beyond the infrastructure improvements themselves, infusions of jobs-producing money translates into mortgage and rent payments and all the usual consumer purchases that fuel families and communities.

Our opinion hasn't changed. Why the Seattle Times changed their mind is open to speculation.

Lincoln's Humble Approach

February 12, 2009 in Blog

Lincoln In honor of Abraham Lincoln's 200th birthday, I listened to an interview with Michael Beschloss who said that Lincoln was a "man of self-doubt." This approach is echoed in other notes written by the President during his time in the White House, one in which he noted that,

In great contests each party claims to act in accordance with the will of God. Both may be, and one must be, wrong. God cannot be for and against the same thing at the same time. In the present civil war it is quite possible that God's purpose is something different from the purpose of either party.

He did not always know whether his approach was correct and constantly questioned himself and sought the advice of others, hence the "Team of Rivals" he gathered around him.

Too often, the debates we have about policy focus on what policy will work best assuming that the perfect solution is merely a question of craftsmanship. We need to remember, however, that just as the knowledge and judgment of that great man was imperfect, our ability to craft perfect political solutions is limited, to say the least.

It is a reason that I have so many doubts about cap-and-trade, a policy that one environmental activist said would involve "remaking the economy of the nation, the whole globe." It is a quote I have used often to highlight the leap of faith required in adopting such massive, all-encompassing approaches.

A more humble approach puts people in charge of these issues, recognizing that only they can know how best to improve energy efficiency and find the best ways to reduce the environmental impact they cause. That's why these approaches are not only more moral by giving individuals control over the key decisions in their life but are consistently more effective than government approaches based on an arrogant, and inaccurate, belief in the expansiveness of their knowledge.

Jay Manning Gets It Wrong...Again...and Again

February 12, 2009 in Blog

Ecology Director Jay Manning is playing extremely fast and loose with the facts in his tour of legislative committees talking about climate change.

Last week he claimed that Europe was on target to meet their CO2 emissions reduction targets by 2012. This requires a great leap of faith. On Sunday, we highlighted the recent data from Europe showing that they are far from reaching the CO2 reductions.

Now there are two more claims which are either ignorant or intentionally misleading.

"We haven't seen any, that I know of, abuses of the market in Europe... We haven't seen any abuse that I am aware of." - Jay Manning before the Transportation Committee, February 9, 2009

This is a remarkable claim. There have been tremendous, well-publicized problems with the cap-and-trade system in Europe with regard to organizations gaming the system. For instance, free credits (i.e. permits to emit CO2 that can be sold) were allocated politically, leaving organizations who lobbied effectively, with extra carbon allocations to sell and a windfall, as we've highlighted before. The director of Germany's carbon trading authority commented last month that "It was lobbying by industry, including the electricity companies, that was to blame for all these exceptional rules," which "enabled companies to get allowances that did not reflect the real situation of their emissions."

In addition to the political gaming that has occurred, others have exploited the rules to sell carbon offsets that produced no real reductions. The US General Accounting Office released a report last November highlighting the many games being played with the Clean Development Mechanism (CDM) which certifies projects designed to reduce CO2 emissions. The key question is whether the reductions are "additional" or whether the reductions would have occurred anyway. The GAO notes that

"significant challenges to ensuring credit quality exist. Many experts and stakeholders have suggested that a substantial number of nonadditional projects have received credits through the CDM, a conclusion supported by several studies."

In other words, there are a "substantial" number of projects that receive funding that do not deserve it. Isn't that the textbook definition of an "abuse?"

"It is a scientific fact that the atmospheric concentration of CO2 at this point is about 360 parts per million. Pre-industrial revolution, which is easy to measure from tree cores and ice cores, it was between, for hundreds of thousands if not millions of years, between 190 and 200. Incredibly stable." - Jay Manning before the Transportation Committee, February 9, 2009

Wrong. The chart below shows CO2 levels from ice cores going back 600,000 years. I've adapted this chart from a chart used by Al Gore found at a web page that promotes science arguing that climate change is real and significant. The chart starts with year 0, which is up to recent years and the time runs backwards 600,000 years as you move right.

CO2-Historical-Trends  Note that CO2 is not "incredibly stable." It has ranged from a low of about 180 parts per million (ppm) to about 300 ppm, a change of 67 percent. Mr. Manning's claim is simply false and is intended to make us believe that the only reason CO2 increases is due to human causes. He wants to discount any indication that CO2 fluctuates naturally, which it clearly does.

One thing Director Manning is right about is that CO2 has risen in the past several decades beyond what we've seen in the last several hundred thousand years. The chart does not show it, but we are at 360 ppm and increasing. I argued just two days ago in Olympia that I believed that taking carbon out of the ground (i.e. coal and oil) and burning them has undoubtedly contributed to this increase. Furthermore, I believe there is risk from increasing CO2. We are offering solutions to address that risk -- solutions that are more likely to actually reduce CO2 and improve energy efficiency than the system Manning supports.

One may argue that my argument here is a nit-pick. He is right that CO2 is increasing due to human causes. He said, however, that all of the change was due to humans. That is not correct. One may argue that this isn't an important distinction. Well, if it isn't important, don't bring it up. If you bring it up, get it right. Mr. Manning didn't.

There are judgment calls in any policy, especially a policy as expansive and complex as dealing with climate change. The errors Director Manning is making, however, are not judgment calls. They are errors of ignorance or are intended to mislead. These errors make it less likely that good policy will emerge on an issue that is likely to have a major impact on our environment and economy.

...but does it work?

February 8, 2009 in Blog

This week, the Senate will again hear testimony on the state's proposed cap-and-trade legislation, designed to reduce greenhouse gas emissions. In the first round of hearings, there was a great deal made about the potential economic costs and benefits of cap-and-trade. Setting those aside for the moment, there was an assumption that,whatever the cost, cap-and-trade will work to reduce CO2 emissions. In fact, the evidence shows that it is unlikely to do so.

Ecology Director Jay Manning testified twice before the Legislature this year that Europe was likely to meet its CO2 reduction targets using the cap-and-trade system under the Kyoto Protocol. A quick look at the data from Europe shows this is not true. The most recent data, found on the EU Environment Agency’s web page, show that the emissions reductions they have achieved under cap-and-trade are almost nonexistent.

First, while the Kyoto Protocol measures emissions against 1990, the agreement was signed in 1997 and has been in effect since then. Emissions reductions prior to 1997 are due to other factors including the collapse of the communist bloc and the economies of E. Europe in the early 90s and the UK’s switch from coal to natural gas in the early 90s. Thus, cap-and-trade is only responsible for emissions reductions since 1997. From 1998 to 2006 (the most recent year for which data is available), emissions of greenhouse gases have declined only 0.42%. Nearly 90 percent of CO2 emissions in Europe occurred before Kyoto was signed. The note below, which highlights this point, is taken from the EU report.


Second, for Europe to meet the goals it would require a sudden reduction of 5 percent in CO2 emissions during the final five years of the protocol (i.e. from 2007 to 2012). As you can see in the chart below, following existing measures, Europe will fail to meet the targets. Adding “additional” measures gets them close but still fails. Only when Europe aggressively pursues carbon offsets from China and elsewhere do they meet the target. Ironically, the EU recently tightened the rules on offsets, meaning that such offsets are likely to decrease, not increase.


Additionally, as is evident, the 5-year average of emissions, represented by the black line, would leave Europe with emissions only slightly below 1990 levels, missing even the projections for the existing measures. Only a sudden downturn not evident at any time up to this point would leave Europe in compliance. The argument that EU is on track to meet their goals is wishful thinking at best. There is no reason to believe that the WCI cap-and-trade system would be any different.

Finally, as a result of the failure of Kyoto in Europe, countries are facing a large penalty,on the order of $46 billion. This cost will be paid by the economies and taxpayers of Europe.

Put simply, cap-and-trade has not lived up to its promise and alternatives are needed. Whatever you believe about the economic merits or disadvantages of cap-and-trade, if it doesn't work, why would we adopt it?