Posts from — May 2009

[Editor note: For an in-depth look at Enron's political capitalism model applied to the climate-change debate, see Bradley's Capitalism at Work: Business, Government, and Energy (M & M Scrivener Press, 2009)] 

On four occasions,  Joseph Romm at Climate Progress (Center for American Progress) has deployed an argument ad hominem against me, using my prior employment at Enron and my direct association with Ken Lay (see here, here,  here, and here). My response to Romm earlier this week has received thousands of views and several blog links, including here.

The irony here is two-fold. First, Romm ignores the fact that I was an employee who personally challenged the company’s rent-seeking via climate alarmism. Secondly, and more ironic still, Enron was his darling company. Specifically, he was an unpaid consultant and collaborator with Enron Energy Services (EES), whose contracts were money losers, reflecting of paucity of economic energy savings. The hidden losses and fake profits of this division were showcased at trial. EES was not a “cool company,” and the companies that outsourced to EES found out they were not that cool also.

A future post [now published] will explore the failure of EES, PG&E Energy Services, and Duke Energy Solutions–the big energy service companies, or ESCOs, that were touted by Romm and Amory Lovins as the next big thing and as leading the way to Kyoto compliance.

I add the following exhibits to the Romm/Enron connection (Enron is bolded below for ease of identification). [Read more →]

On May 5, 2009, EPA Administrator Lisa Jackson signed a proposed rule to implement changes in the federal Renewable Fuel Standard (RFS) program required by the 2007 Energy Independence and Security Act (EISA).

Congress created the RFS–commonly known as the ethanol mandate–in the 2005 Energy Policy Act. The leading rationale then was energy security. It was supposed to reduce our dependence on foreign oil. EISA increased the size of the mandate from 7.5 billion gallons a year in 2012 to 36 billion gallons a year in 2022.

In addition, EISA established greenhouse gas (GHG) reduction standards that fuels must meet in order to qualify as “renewable.” Arguably, this was the first regulatory global warming policy that Congress ever enacted. Well, how much global warming will it avert? Answer: Too little for scientists to detect even if the new mandates are enforced throughout the 21st century. [Read more →]

Yesterday’s MasterResource post looked at the potential climate impacts of the proposed Waxman-Markey Climate Bill. But I limited my analysis to only U.S. actions—after all, Waxman-Markey can’t mandate international man-made greenhouse gas reduction timetables. But, what would happen if the rest of the world wanted to join in?

The Bottom Line

The ability of the industrialized world, through emissions reductions alone, to impact the future course of global climate is minimal. If the U.S., Canada, Australia, Japan, Europe, and former Soviet countries all limited their emissions of greenhouse gases according to the schedule laid out under Waxman-Markey—a monumental, unexpected development—it would, at most, avoid only a bit more than one-half of a °C of projected global warming (out of 4.5°C—or only about 10%). And this is under worst-case emissions assumptions; middle-of-the-road scenarios and less sensitive climate models produce even less overall impact.

To make any significant in-roads to lowering the rate (and thus final magnitude) of projected global temperature rise, the bulk of the emissions reduction needs to come from other parts of the world, primarily Asia, Africa, South America, and the Middle East. The problem is, is that these governments are not inclined to restrict the energy usage of its citizens—in fact, they either are in the process of, or are soon hoping to, significantly expand the amount of energy available to their (growing) populations—and in the process, subsuming all potential emissions savings from the (current) industrialized world.

If supporters of large greenhouse gas emissions restrictions were really interested in “saving the world,” they would be putting all of their effort into getting China and India to buy into their plan—and then turning to the U.S. up in mop up duty. As it stands now, they are talking to the wrong end of the horse.

Background

Over the first decade of the 21st century, global carbon dioxide emissions have been growing a pretty good clip—in fact, they’ve been growing at a rate which exceeds the projected rate from the most extreme scenario envisioned by the Intergovernmental Panel on Climate Change (IPCC). [Read more →]

Editor Note: Using mainstream models and assumptions, Mr. Knappenberger finds that in the year 2050 with a 83% emissions reduction (the aspirational goal of Waxman-Markey, the beginning steps of which are under vigorous debate), the temperature reduction is nine hundredths of one degree Fahrenheit, or two years of avoided warming by 2050. A more realistic climate bill would be a fraction of this amount. The author will respond to technical questions on methodology and results and invites input on alternative scenarios and analyses.

“A full implementation and adherence to the long-run emissions restrictions provisions described by the Waxman-Markey Climate Bill would result only in setting back the projected rise in global temperatures by a few years—a scientifically meaningless prospect.” (from below)

The economics and the regulatory burdens of climate change bills are forever being analyzed, but the bills’ primary function—mitigating future climate change—is generally ignored.

Perhaps that’s because it is simply assumed.

After all, we are barraged daily with the horrors of what the climate will become if we don’t stop emitting greenhouse gases into the atmosphere (the primary focus being on emissions from the combustion of fossil fuels). So doing something as drastic as that proposed by Waxman-Markey—a more than 80% reduction of greenhouse gas emissions from the United States by the year 2050—must surely lessen the chances of climate catastrophe. Mustn’t it?

But if that were the case, why aren’t the climate impacts being touted? Why aren’t Representatives Waxman and Markey waving around the projected climate success of their bill? Why aren’t they saying: “Economics and regulations be damned. Look how our bill is going to save the earth from human-caused climate apocalypse”?

That reason is that it won’t. [Read more →]

[Editor note: Also see "Joseph Romm and Enron: More for the Record" (May 8, 2009) and "Enron and Waxman-Markey: Response to Joe Romm" (July 2, 2009)]

The headline at Climate Progress, the blog site of Joseph Romm, senior fellow at the Center for American Progress, read:

MYSTERIOUS INDUSTRY FRONT-GROUP AFFILIATED WITH KEN LAY’S FORMER SPEECHWRITER LAUNCHES ANTI-WAXMAN-MARKEY ADS WITH PHONY MIT COST FIGURE

And here is what Romm specifically says about me:

Who is the [American Energy Alliance]?  Good question.  The AEA says on its website:

“AEA is an independent affiliate of the Institute for Energy Research (IER)….”Aside from the cryptic nature of the oxymoronic phrase “independent affiliate,” it is worth noting that the Institute for Energy Research “has received $307,000 from ExxonMobil since 1998.” The President of IER is one Robert Bradley “who previously served as Director of Public Policy Analysis at Enron, where he was a speechwriter for CEO Kenneth Lay,” who was “convicted on fraud and conspiracy charges on May 25, 2006.”

And here is what Romm said about me in March at Climate Progress:

So it is only fair to note that the myth articles were “produced with support from the Institute for Energy Research …. The President of IER is Robert Bradley ‘who previously served as Director of Public Policy Analysis at Enron, where he was a speechwriter for CEO Kenneth Lay,’ who was “convicted on fraud and conspiracy charges on May 25, 2006.”

’Nuff said on that.

His implication is that I am somewhere between a dunce and a fraud because of my association with Enron and Ken Lay. But Romm should know better. He and I had email wars when I was at Enron, and Joe was Enron’s cheerleader, even complaining to his “friends” there about me.

Here is the background, as told in my book Capitalism at Work (p. 311): [Read more →]

One dumb government intervention in energy markets typically begets another, as special interests lobby to counteract the unintended (although not unforeseen) consequences of some previous intervention they championed. The federal ethanol mandate, also known as the renewable fuel standard (RFS), provides a recent example.

Thanks to this Soviet-style production quota system, which Congress created in 2005 and expanded in 2007, daily corn ethanol production in February increased by about 17,000 barrels to 647,000 barrels per day, despite weak motor-fuel demand and poor to negative profit margins for ethanol producers. 

Unsurprisingly, inventories of unsold ethanol increased by 1.5 million barrels in February and about 20% of new capacity added last year is idle. An ethanol glut is one of the factors that have bankrupted several ethanol companies. Other factors include high feedstock (corn) prices in 2008–itself a consequence of the mandate—and the collapse of crude oil and gasoline prices in 2009.

To eliminate the glut, the Renewable Fuels Association (RFA) has petitioned EPA to increase from 10% to 15% the amount of ethanol that may be blended into regular gasoline.  In other words, RFA proposes to increase by 50% the amount of ethanol you buy each time you fill up. The small-engine industry worries that gasoline containing 15% ethanol might damage lawnmowers, motor boats, generators, and even some cars. Significant research suggests that higher ethanol blends will increase air pollution (see here and here). None of this bothers RFA one bit.

Although not overtly a mandate, raising the blend ceiling to 15% would likely make 15% the industry standard, because refiners are under constant legal pressure to increase the amount of ethanol they blend into the nation’s fuel supply.  Under the 2007 RFS, corn ethanol used in motor fuel must increase from 9 billion gallons in 2008 to 15 billion in 2015. 

The ethanol industry enjoys a multitude of market-rigging privileges including the RFS, tariffs to keep out cheaper Brazilian ethanol made from sugar cane, and a 45-cents-per-gallon blenders tax credit for each gallon of ethanol sold in motor fuel. Take away those policy stilts, and practically no ethanol would be produced or sold as motor fuel.

But, claim ethanol apologists, ethanol would become fully competitive with gasoline, even out-compete gasoline, if ethanol were “allowed” to compete. Huh? The argument goes like this. [Read more →]

“Today, 1.6 billion people in developing countries do not have access to electricity in their homes. Most of the electricity-deprived are in sub-Saharan Africa and south Asia. For these people, the day finishes much earlier than in richer countries for lack of proper lighting. They struggle to read by candle light. They lack refrigeration for keeping food and medicines fresh. Those appliances that they do have are powered by batteries, which eat up a large share of their incomes.”

- Faith Birol, “Energy Economics: A Place for Energy Poverty in the Agenda?” The Energy Journal, Vol. 28, No. 3 (2007), 1–6, at 3.

Chris Flavin, head of the Worldwatch Institute, has written prolifically (albeit often erroneously) on energy and the environment. Ken Lay, the architect of Enron’s “sustainable energy” vision, was a Flavin fan, keeping this study in his “Desk.”

I often wonder: What if Dr. Lay (as he liked to be called by the outside world–part of Enron’s “smartest guys in the room” problem) had instead kept a copy of William Stanley Jevons’s The Coal Question in his desk and had taken to heart Jevons’s argument that renewable energies were ill-suited for the carbon-based energy era.  But Lay was a political capitalist and second-hander, not a true capitalist or intellectual CEO like Charles Koch of Koch Industries Inc.

Back to Mr. Flavin. [Read more →]

Editor’s note: Keith Rattie, Chairman, President and CEO of  Questar Corporation, headquartered in Salt Lake City, Utah, gave this speech at Utah Valley University on April 2, 2009. The full version is on Questar’s website. Subtitles have been added.

Energy Myths and Realities

There may be no greater challenge facing mankind today – and your generation in particular – than figuring out how we’re going to meet the energy needs of a planet that may have 9 billion people living on it by the middle of this century. The magnitude of that challenge becomes even more daunting when you consider that of the 6.5 billion people on the planet today, nearly two billion people don’t even have electricity – never flipped a light switch.

False 1970s Consensus

Now, the “consensus” back in the mid-1970s was that America and the world were running out of oil. Ironically, some in the media were also claiming a scientific consensus that the planet was cooling, fossil fuels could be to blame, and we were all going to freeze to death unless we kicked our fossil-fuel habit. We were told we needed to find alternatives to oil – fast. That task, we were told, was too important to leave to markets, so government needed to intervene with massive taxpayer subsidies for otherwise uneconomic forms of energy. That thinking led to the now infamous 1977 National Energy Plan, an experiment with central planning that failed miserably. Fast-forward to today, and: déjà vu. This time the fear is not so much that we?re running out of oil, but that we?re running out of time – the earth is getting hotter, humans are to blame, and we’re all doomed if we don’t stop using fossil fuels – fast. Once again we?re being told that the job is too important to be left to markets.

Well, the doomsters of the 1970s turned out to be remarkably wrong. My bet is that today’s doomsters will be proven wrong. [Read more →]