Category — Regulation, Unintended Consequences
[Editor Note: This is Part One in a two-part series by Mr. Tanton on counter-productive regulation passed in the name of addressing manmade climate change. Part II tomorrow focuses on California. ]
Cap-and-trade programs (CTP) do not provide incentives to develop innovative technologies and likely increase emissions, according to a new essay, Innovation Under Cap-and-Trade Programs, published in Proceedings of the National Academy of Sciences. Author Margaret Taylor, a researcher at Lawrence Berkeley National Laboratory, completed her study as assistant professor at the University of California-Berkeley’s Goldman School of Public Policy.
Based on actual case studies, she found that CTP have reduced incentives for research and development. “Policymakers rarely see with perfect foresight what the appropriate emissions targets are to protect the public health and environment,” said Taylor.
Emission targets might actually be set more strict, she explains, even while the mechanism (i.e. CTP) may be inefficient, or ineffective, or counterproductive. Yet policymakers also seldom set targets they don’t have evidence that industry can meet. This is where R&D that can lead to the development of innovative technologies over the longer term is essential.
The Estimation Problem
Putting aside whether the targets (i.e. emission levels) are set correctly, the question remains whether cap-and-trade is a useful mechanism. In fact, it might actually get in the way of the technology that reduces emissions and achieves other worthwhile goals like productivity enhancement and wealth creation. [Read more →]
April 4, 2012 5 Comments
Regulatory Fatigue: A Small Business Perspective (Industrial heating industry needs affordable energy)
The health of our businesses is (or should be) a concern for all of us. As 2012 is still in its infancy, let’s take some time to reflect on new and upcoming regulations. Why? Because regulations are a part of the reason we are stuck between 8 and 9 percent unemployment and why business leaders are so uncertain of our economic future and unwilling to invest in it to create jobs. It’s a vicious circle.
This vicious circle has consequences, as explained by Cynthia Magnuson of the National Federation of Independent Business. She indicated that Washington’s recent policies have worsened the three top concerns among employers: healthcare costs, corporate tax complexity, and increased government regulations. Another business leader suggested that we “need to drain the regulatory swamp.”
Over the past three years, that swamp has gotten deeper. There are currently more than 4,200 proposed federal rules awaiting approval. Those that impact small businesses have increased more than 11% since 2009. The rule maker hurting job creators the most – and likely to have the greatest impact in our industry – is the EPA. They are currently considering hundreds of regulations.
February 14, 2012 3 Comments
Between the current financial mess and the debate over carbon dioxide emissions controls, there is a lot of talk about regulation these days. We are told, for example, that the recession would have been prevented if proper regulations had been in place. While it is true that (by definition) the “right” regulations would have prevented bad and ensured good, it is also true that had an omniscient, omnipotent, omnibenevolent dictator been in charge, the recession would have been avoided as well. The problem, of course, is that God, being otherwise occupied, didn’t run for President during the last election.
Enacting the right regulations is somewhat simpler than electing an omni-everything being to run the world, but not much. As evidence, consider the fact that it was a lot of the wrong regulations that got us into this mess in the first place. Also consider the oft heard argument that financial regulators needed to “get out ahead of the innovators.” Clearly, a job for the omniscient. There is, after all, a reason why the Wright Brother’s flight at Kitty Hawk preceded the establishment of the Federal Aviation Administration.
Any time government regulators try to do much more than lay out the basic rules of the game, unintended consequences and moral hazards rear their ugly heads. The following list of pitfalls, adapted from our book Energy: The Master Resource, is offered as a caution to regulatory enthusiasts. [Read more →]
July 24, 2010 3 Comments
The typical pulverized coal power plant in the U.S. is about 35 years old, yet the fleet will continue to operate for many years to come. New coal-fired plants, meanwhile, will continue to enter service but at a slow rate. There may not be a future price for carbon dioxide (CO2) given the dramatic scientific and political developments that we are going through, but cheap natural gas makes it difficult to justify the higher up-front costs of a new coal plant.
Still, there is significant new electricity generation capacity is possible from these older plants, perhaps as much as 30,000 MW–twice EIA’s projected growth of coal power over the next two decades. In addition, new technology upgrades have the potential of improving the operating efficiency by 3% to 5%. But the impediment for such win-wins is the risk of a New Source Review violation, years of litigation, and possibly fines.
Given the Obama Administration’s stance against coal, many attendees of the National Coal Council’s December meeting were caught flat-footed when DOE Assistant Secretary for Fossil Energy James Markowsky suggested an exception be made under Clean Air Act’s New Source Review (NSR) program. Mr. Markowsky proposed easing the NSR requirements for power plants that make modifications to improve their operating efficiency–assuming those plants would be good candidates for a later retrofit of a carbon capture and sequestration (CCS) system.
Markowsky’s trial balloon also suggested that candidate plants would already have installed flue gas desulfurization (FGD) systems. The concept is intriguing but doesn’t go near far enough in solving the nation’s energy woes.
NSR Definitions Remain Murky
NSR is the process established by the Clean Air Act (CAA) that requires utilities to add a host of new and expensive emission controls should they make any “major modifications” to the plant that increase emissions. The definition of a major modification has been the subject of numerous court battles since the Clinton Administration yet stills remains murky. Even when upgrades were discussed with the EPA in advance of their installation, Justice has routinely lowered the legal boom on utilities that made common maintenance changes to their plants The usual result has been a decade of legal maneuvering followed by a consent decree agreement where the utility agrees to install new emission controls and pay a fine. [Read more →]
February 4, 2010 2 Comments
“[Government] intervention that impinges on complex market forces can produce both unpredicted and unpredictable results.”
- Robert Bradley, Oil, Gas, and Government: The U.S. Experience (vol. 2), p. 1791.
Of all the environmental boondoggles of recent years, the biggest must be corn ethanol. As MasterResource’s Ken Green wrote in an article summarizing ethanol’s impact on the environment:
Contrary to popular belief, ethanol fuel will do little or nothing to increase our energy security or stabilize fuel prices. Instead, it will increase greenhouse gas emissions, local air pollutant emissions, fresh water scarcity, water pollution (both riparian and oceanic), land and ecosystem consumption, and food prices.
In a recent speech, Green elaborated, pointing out
the absolute fiasco of corn ethanol, which has caused increases in air pollution, water pollution, freshwater consumption, coastal pollution, greenhouse gas emissions, and food prices.
In 1997, the U.S. GAO found that the ethanol production process produces more nitrous oxide and other powerful greenhouse gases than does gasoline production. A decade later, Colorado scientists Jan Kreider and Peter Curtiss concluded that carbon dioxide emissions in the production cycle are about 50 percent higher for ethanol than for traditional fossil fuels.
Making ethanol from cellulosic plants such as switch grass won’t help. In fact, researcher Timothy Searchinger and colleagues calculated that ethanol from switch grass, if grown on U.S. corn lands, would increase greenhouse gas emissions by 50 percent compared to using regular gasoline. [Read more →]
December 7, 2009 5 Comments