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Posts from — March 2011

The U.S. EPA’s Regulatory Clean Air Benefit-Cost Estimates (30 free lunches for the price of 1?)

Last August, the the United States Environmental Protection Agency (EPA) graded itself on its enforcement of the Clean Air Act (CAA) in terms of economic benefit-cost analysis. Surprise not: EPA came up with an astounding $31 of clean air benefits for every dollar of cost. That, and Administrator Lisa Jackson can leap tall buildings in a single bound.

Deja Vu: EPA’s 1997 Study

Back in 1997, the EPA credited itself with providing $22.2 trillion in benefits at a cost of a half trillion dollars from enforcing the CAA from 1970 (when the EPA was established) through 1990 (when Congress amended the CAA in stricter form)—a B/C ratio of more than 40-to-1.

Of the EPA’s $22 trillion net benefit estimate (gross benefits less cost), economists Randall Lutter and Richard B. Belzer wrote: “We know of no professional economist independent of EPA who takes the EPA’s estimate seriously,” for—if actually true—the sum would equal “roughly the aggregate net worth of all U.S. households.”

Lutter and Belzer scoffed convincingly but not enough to change the EPA’s penchant for grandiosity. Hence, more yardsticks are needed to measure the absurdity of the EPA’s cost-benefit estimates, at both the “macro” and “micro” levels. Such a stock-taking points toward a do-over on the costs and benefits of clean air regulation by EPA.

Macro Level Issues

Regarding the 1997 study, Lutter and Belzer compare EPA’s finding to other major statistics for the entire economy. Here are some more “macro” yardsticks to measure the EPA’s astounding B/C claims:

Comparison to U.S. Defense Spending. The EPA’s August 2010 study’s estimate of the annual clean air benefits amount to nearly twice U.S. defense spending, including operations in Iraq and Afghanistan. Plausible?

Comparison to GDP. Incredibly, the EPA’s total net benefit estimate is far higher still. The EPA subdivides the clean air benefits into: (A) the benefits attributable to the amended CAA (as already noted, nearly twice annual defense spending); plus (B) the benefits attributable to the CAA of 1970 – 1990, the legislative foundation on which the amended CAA rests. Including the benefits from Part B would push the grand total to as much as 60% or 70% of annual U.S. GDP—a result so obviously absurd that EPA’s August 2010 study obscures it with a schematic diagram. [Read more →]

March 31, 2011   4 Comments

Hassling Electricity: EPA’s Proposed MACT Rules

Presidential candidate Barack Obama promised that his policies would cause electricity rates to “skyrocket” and “bankrupt” any company trying to build a coal-fired generating plant. This is one promise he and his über-regulators are keeping.

President Obama energetically promotes wind and solar projects that require millions of acres of land and billions of dollars in subsidies to generate expensive, intermittent electricity and create (really centrally plan) jobs that cost taxpayers upwards of $220,000 apiece – most of them in China.

His Interior Department is locking up more coal and petroleum prospects, via “wild lands” and other designations, and dragging its feet on issuing leases and drilling permits.

Meanwhile, his Environmental Protection Agency is challenging shale gas drilling and fracking, and imposing draconian carbon dioxide (CO2) emission rules, now that Congress and voters have rejected cap-tax-and-trade.

Across agencies, the war is on against the dense, reliable energies that were part of the Industrial Revolution (see the posts on W. S. Jevons for more) and are behind modern society today.

The beat-down of carbon-based energy goes on. Oil, gas and coal provide approximantely 84% of the energy that keeps America humming, but the administration is doing all it can to reduce each and all. American voters, consumers and workers may want more drilling, mining and use of hydrocarbons, to get the economy going again. But the administration has a different agenda.

EPA Administrator Lisa Jackson has unveiled another 946 pages of regulations that she claims will protect public health. The regs cover 84 “dangerous pollutants” that are already being scrubbed out of power plant emission streams by a host of innovative technologies. In fact, coal-fired generators now emit a fraction of what they did just 40 years ago.

The most frequently cited of these pollutants is mercury. Higher doses cause well-known ill-health effects, from severe neurological damage to brain damage and death. However, it has been all but eliminated in herbicides, light switches, thermometers and other products.

Its presence in coal and power plant emissions is likewise minimal and declining. [Read more →]

March 30, 2011   1 Comment

Energy Debate in Wonderland: Let’s Go for the Kill Against Windgas (Part II: Effective Capacity)

“… paying anything for resources that yield no or little effective capacity seems deranged as a means of promoting economic recovery for the most dedicatedly modern country on the planet.”

In energy debates (such as held recently by the Economist), arguments can be made against government-dependent renewables on grounds that coal and natural gas are in abundant supply and fossil fuels are being burned cleaner and cleaner.

These arguments, however, are mere body blows. Robert Bryce (see Part I) should have supplied the knockout punch by reminding all that any meaningful discussion of electricity production, which could soon embrace 50% of our overall energy use, must consider the entwined goals of reliability, security, and affordability, since reliable, secure, affordable electricity is the lynchpin of our modernity.

Effective Capacity

Economic recovery must be built upon such a foundation. At the core of this triad, however, resides the idea of effective capacity—the ability of energy suppliers to provide just the right amount of controllable power at any specified time to match demand at all times. It is the fount of modern power applications.

By insisting that any future technology—clean, cleaner, or otherwise, particularly in the electricity sector—must produce effective capacity, Bryce would have come quickly to the central point, moving the debate out of Wonderland and into sensible colloquy.

Economically and functionally, comparing wind and solar with conventional generation is spurious work. Saying that the highly subsidized price of wind might, maybe, possibly become, one day, comparable to coal or natural gas may be true. But even if this happens, if, say, wind and coal prices become equivalent, paying anything for resources that yield no or little effective capacity seems deranged as a means of promoting economic recovery for the most dedicatedly modern country on the planet. [Read more →]

March 29, 2011   6 Comments

Energy Debates in Wonderland: Let’s Go for the Kill Against GasWind (Part I)

March Hare (to Alice): Have some wine.

(Alice looked all round the table, but there was nothing on it but tea.)

Alice: I don’t see any wine.

March Hare: There isn’t any.

Alice: Then it wasn’t very civil of you to offer it.

March Hare: It wasn’t very civil of you to sit down without being invited.

— From Lewis Carroll’s Alice in Wonderland

Energy journalist Robert Bryce in Power Hungry foretells an electricity future anchored by natural gas that will bridge the transition to nuclear power. With his third book in less than a decade, Bryce is now a leading light of the energy policy debate, appearing regularly on op-ed pages and on news shows.

Bryce recently participated in two debates. In one hosted by The Economist, he argued for the proposition that “natural gas will do more than renewables to limit the world’s carbon emissions.” In a second debate, an Intelligence Squared forum sponsored by the Rosenkranz Foundation, Bryce and American Enterprise Institute scholar Steven Hayward argued against the proposition that “Clean Energy can drive America’s economic recovery.”

The Economist Debate

There’s more evidence that the enchanted Easter bunny brings children multi-colored eggs than there is that those renewable-energy darlings wind and solar can put a dent in CO2 emissions despite their massively intrusive industrial presence.

The first debate was little more than a curiosity. No one mentioned hydroelectric–the most widely effective “renewable” (it now provides the nation with about 7% of its electricity generation)–because it is an environmental pariah to the likes of The Sierra Club and has little prospect for growth.

Nuclear, which provides the nation’s largest grid, the PJM, with about 40% of its electricity, is not considered a renewable, despite producing no carbon emissions; it is also on The Sierra Club’s hit list. Geothermal and biomass, those minor league renewables, were given short shrift, perhaps because no one thought they were sufficiently scalable to achieve the objective.

So it was a wind-versus-gas scrum played out as if the two contenders were equally matched as producers of power.  And here is where I must complain. [Read more →]

March 28, 2011   5 Comments

Human Achievement Hour (Shine those lights this Saturday night as the late Julian Simon would have it!)

Kudos to the Competitive Enterprise Institute for countering the anti-energy (and thus anti-industrial and anti-capitalism) campaign to keep the electricity off this Saturday night with an electricity-is-good event!

Human Achievement Hour counters Earth Hour, which is explained at Wikipedia as follows:

Earth Hour is a global event organized by WWF (World Wide Fund for Nature, also known as World Wildlife Fund) and is held on the last Saturday of March annually, asking households and businesses to turn off their non-essential lights and other electrical appliances for one hour to raise awareness towards the need to take action on climate change. Earth Hour was conceived by WWF and The Sydney Morning Herald in 2007, when 2.2 million residents of Sydney participated by turning off all non-essential lights.[1] Following Sydney’s lead, many other cities around the world adopted the event in 2008.[2][3] Earth Hour 2011 will take place on March 26, 2011 from 8:30p.m. to 9:30 p.m., at participants’ respective local time.

Here is what CEI recently distributed:

HUMAN ACHIEVEMENT HOUR 2011
March 26th 8:30pm – 9:30pm

On Saturday March 26th 2011 from 8:30pm to 9:30pm individuals, business, and governments will shut off their lights for one hour as a symbolic vote against global climate change. Observers of Earth Hour want world leaders to “do something” about pollution and energy use.  What this means is that they want politicians to use sanctions and taxation to prevent individuals from freely using resources, hindering our ability to create the solutions and technologies of the future.

During this same hour The Competitive Enterprise Institute encourages you to leave your lights on for the third annual Human Achievement Hour (HAH), a celebration of individual freedom and appreciation of the achievements and innovations of humans throughout history. To celebrate Human Achievement Hour participants need only to spend the 8:30pm to 9:30pm hour on March 26th enjoying the benefits of capitalism and human innovation: gather with friends in the warmth of a heated home, watch television, take a hot shower, drink a beer, call a loved one on the phone, or listen to music. If you are in the DC-metro area, join CEI’s in-house party for drinks, food, good music, and conversation about human innovation. [Read more →]

March 25, 2011   6 Comments

Cars, Washing Machines, or Both? (energy is the master resource ….)

What did Julian Simon have in common with Bjorn Lomborg? Both had strong statistics experience, and both started their research believing in popular environmental and over-population fears. Both Simon and Lomborg were convinced they could employ statistical  research to document and address these problems.

However, both Simon and Lomborg unexpectedly proved themselves wrong by looking seriously at empirical evidence.  Simon’s Malthusian-paradigm-busting book, The Ultimate Resource (1981), influenced many with its optimistic pro-technology data, analysis, and conclusions. (1) Years later Wired magazine interviewed Julian Simon and put him on the cover, complete with Julian’s little red devil’s horns.

Bjorn Lomborg picked up the Wired issue at the Los Angeles airport and read Simon’s claims with skepticism and even dismay.  Simon had to be wrong! And as a statistic professor, Lomborg was confident he could document and popularize the errors.  So, another convert was born through sound statistical research.

Lomborg discovered to his surprise that Simon and later associates (whose articles were gathered in The Resourceful Earth and Ultimate Resource 2), were essentially correct in documenting technological benefits and environmental progress. Pollution levels were dropping in developed countries, natural resources becoming less scarce, and population increases brought benefits that could outweigh environmental costs.

Now another statistician, Hans Rosling, has joined this ongoing debate with a series of creative graphical presentations explaining the stunning economic progress in the developed world since the Industrial Revolution, and the value of extending these benefits to billions still living in pre-industrial poverty.

Hail to the Washing Machine! (Hans Rosling)

Rosling’s latest presentation at a recent TED conference focuses on the quiet benefits of washing machines in the lives of women.  Rosling notes that when he asks his environmentally-sensitive university classes how many don’t drive cars, a number raise their hands, pleased to show their commitment.

But then he asks how many wash their clothes by hand, no one responds.  (I actually looked into this many years ago when renting a small house in Houston.  The Whole Earth Catalog had a hand-cranked washing device. If I could have hooked it up to a stationary bicycle, I might have tried it.)

Rosling’s core points are: [Read more →]

March 24, 2011   5 Comments

Promise for Uganda: Prosperity Through Oil & Gas Development

[The greatest opportunity for wealth creation in many poor countries is oil and gas development. In particular, subsoil privatization can incite resourceship and democratize wealth as explained by Guillermo "Billy" Yeatts in Subsoil Privatization for Energy Sustainability. The following post by Cyril Boynes, Jr. co-chair of the Congress of Racial Equality Uganda, contributes to this discussion.]

I am of a Christian background. However, one of my favorite people was Jewish, and another is Muslim.

The Jewish man was business professor and author Julian Simon. He taught that people are the world’s most valuable resource, and the “ultimate resource” is our creative intellect.

The Muslim is Bangladeshi banker and economist Muhammad Yunus. He says “poor people are like bonsai trees,” planted in a little pot. “There is nothing wrong with their seeds. It’s just that society never gave them an adequate soil base to grow.”

“Once the poor can unleash their energy and creativity,” Dr. Yunus continues, “poverty will disappear very quickly. The poor themselves can create a poverty-free world. All we have to do is free them from the chains that governments have put around them.”

We need freedom, and opportunities to get an education and open businesses. We need a government and legal system that protects our property rights and contracts, regulates dangerous pollution and activities, and protects us from criminals and unscrupulous business people, but without having so many rules that people and businesses cannot function properly.

But even if we have all these things, we still cannot have opportunity, health and prosperity unless we also have energy. Maybe most of all we need enough affordable, reliable electricity to power lights, ovens, refrigerators, computers, machinery, fans and air conditioners, office and hospital equipment, mobile phone chargers and other modern devices.

These technologies let us work past sundown, create good jobs, make products that people need, and provide clean water, surgical centers and countless other benefits.

That’s why Mr. Roy Innis, chairman of the Congress of Racial Equality in America, calls energy the “master resource.” He says our ingenuity is the ultimate, most important resource, because it lets us design, build and operate so many things.

However, without energy that families and businesses can afford, energy that is there every time we need it, even the most modern, creative, educated, technologically advanced country cannot function properly. People in poor countries are even more constricted, like bonsai plants in little pots.

Right here in Uganda, we have many educated, energetic, creative, hard working people. Our legal system lets us open businesses and do many other things. But outside of Kampala and other growing municipalities like Ishaka, Jinja and Gulu, most families, villages and businesses still don’t have electricity – and even in these municipalities frequent power outages create problems. Almost 30 million Ugandans never have electricity or get it only a few hours a week. [Read more →]

March 23, 2011   1 Comment

Cut Regulation, Not Just the Budget

“But you must remember, my fellow-citizens, that eternal vigilance by the people is the price of liberty, and that you must pay the price if you wish to secure the blessing.  It behooves you, therefore, to be watchful in your States as well as in the Federal Government.”

– Andrew Jackson, Farewell Address, March 4, 1837.

President Obama’s proposed FY2012 Federal Budget has come under heavy fire for its modest reach in real reform. With deficits projected to be in the trillions for the foreseeable future, the amount of budget cutting proposed is certainly underwhelming. Lost in the battle over $6 billion cuts offered by the President and the Democrats, and the $61 billion of cuts the Republicans want, is the use of another powerful tool to help get the economy moving – reining in regulation.

Regulation is a hidden tax on all of us. Costly rules written by unelected bureaucrats add to the costs of producing goods and services in the private sector. Our firms must recoup those costs by passing them on to consumers. In this global economy, American workers then are put out of work because our firms cannot compete with lower prices for imports from foreign manufacturers. Regulations whose benefits don’t exceed their costs are a serious drag on the economy.

In his State of the Union Address, President Obama called for congressional support for a review of all federal regulations that put an unnecessary burden on businesses. Well, the 112th Congress is going the President one better by calling out the EPA for its plans for extremely costly regulation of greenhouse gasses. Both the Senate and the House have proposed legislation to take back control of this issue.

President Obama has called for a regulatory system that protects public health and the environment and also promotes economic growth. He has said that benefits and costs must be taken into account to achieve these objectives.

EPA’s Futile Crusade

Greenhouse gas regulations being developed at the Environmental Protection Agency are a veritable mother load of extremely costly rules with doubtful benefits. Furthermore, EPA has proposed guidelines for reducing greenhouse gas emissions from power plants and automobiles without comparing costs and benefits. [Read more →]

March 22, 2011   2 Comments

Recent Weather Extremes: Global Warming Fingerprint Not

On occasion, I have the opportunity to assist Dr. Patrick J. Michaels (Senior Fellow in Environmental Studies at the Cato Institute) in reviewing the latest scientific research on climate change. When we happen upon findings in the peer-reviewed scientific literature that may not have received the media attention that they deserved, or have been misinterpreted in the popular press, Pat sometimes covers them over at the “Current Wisdom” section of the Cato@Liberty blog site.

His latest posting there highlights research findings that show that extreme weather events during last summer and the previous two winters can be fully explained by natural climate variability—and that “global warming” need not (and should not) be invoked.

This topic—whether or not weather extremes (or at least some portion of them) can be attributed to anthropogenic global warming (or, as Dr. Pielke Sr., prefers, anthropogenic climate change)—has been garnering a lot of attention as of late. It was a major reason for holding the House Subcommittee hearing last week, is a hot topic of discussion in the press, and is the subject of an in-progress major report from the Intergovernmental Panel on Climate Change (IPCC).

As such, I wanted to highlight some of the findings that Pat reported on. I encourage a visit to the full article “Overplaying the Human Contribution to Recent Weather Extremes” over at Cato@Liberty.

The Great Russian Heat Wave of 2010

A new paper by Randall Dole and colleagues from the Physical Sciences Division (PSD) of the Earth System Research Laboratory (ESRL) of the National Oceanic and Atmospheric Administration (NOAA) examined the events leading up to and causing the big heat wave in Russia last summer (which was also part of an atmospheric pattern that was connected to the floods in Pakistan). Here is what they found:

“Our analysis points to a primarily natural cause for the Russian heat wave. This event appears to be mainly due to internal atmospheric dynamical processes that produced and maintained an intense and long-lived blocking event. Results from prior studies suggest that it is likely that the intensity of the heat wave was further increased by regional land surface feedbacks. The absence of long-term trends in regional mean temperatures and variability together with the [climate] model results indicate that it is very unlikely that warming attributable to increasing greenhouse gas concentrations contributed substantially to the magnitude of this heat wave.”

As Pat commented, “Can’t be much clearer than that.”

Recent Winter Severity

From Pat’s article: [Read more →]

March 21, 2011   2 Comments

‘Green Jobs’: An Application of the Broken Window Fallacy (Henry Hazlitt speaks to us today)

The broken window…. An elementary fallacy. Anybody, one would think, would be able to avoid it after a few moments’ thought. Yet the broken window fallacy, under a hundred disguises, is the most persistent in the history of economics. It is more rampant now than at any time in the past. It is solemnly reaffirmed every day by great captains of industry, by chambers of commerce, by labor union leaders, by editorial writers and newspaper columnists and radio commentators, by learned statisticians using the most refined techniques, by professors of economics in our best universities. In their various ways they all dilate upon the advantages of destruction.

- Henry Hazlitt, Economics in One Lesson, chapter 4.

Henry Hazlitt (1894–1993) was a journalist turned economist and philosopher and overall giant of free-market thought. He was best known for his regular Newsweek column, “Business Tides” (1946–66), but also wrote for The Wall Street Journal, Nation, American Mercury, and New York Times, among other publications.

His list of books is impressive, and he became a great economist in his own right with the single work, The Failure of the ‘New’ Economics: An Analysis of the Keynesian Fallacies, a book which influenced this writer greatly in college.

For more description of Hazlitt’s career, which spanned a very dark time for classical liberalism, see here.

The Fallacy Explained

Henry Hazlitt described the broken window fallacy in chapter 11 of his classic, Economics in One Lesson: [Read more →]

March 18, 2011   4 Comments