Saturday, October 24, 2009

Climate Progress

Climate Progress



Energy and Global Warming News for October 23: New poll finds climate action support; Chamber accelerates lobbying

Posted: 23 Oct 2009 10:30 AM PDT

New survey finds US and 37 others demand more aggressive climate action

The first-ever deliberative global survey of citizen opinion, World Wide Views on Global Warming (WWViews) has found that people from diverse backgrounds in the US and worldwide overwhelmingly want faster action, deeper GHG emissions cuts and stronger enforcement than either US climate legislation proposals or Copenhagen treaty conference preparations are currently contemplating. Among the survey's findings:

  • 90% of U. S. participants say it is urgent to reach a tough, new  agreement at the  UN Climate Change Conference in Copenhagen in December and not punt to  subsequent meetings;
  • 89% said by 2020 emissions should be cut 25-40% below 1990 levels (the  Kerry Boxer Senate bill would cut US emissions 20% below 2005 levels);
  • 71% want nations that fail to meet their obligations under a new agreement to be  penalized severely or significantly;
  • 69% believe the price of fossil fuels should be increased.

These views were echoed across 37 other countries on six continents. Global results showed participants wanted more aggressive action than their delegates to Copenhagen envision, including:

  • strict targets for keeping global warming within 2 degrees Celsius (half of participants, especially in countries hardest hit by climate change, want measures to hold temperatures at the current level or even bring them down to pre-industrial levels);
  • fairer and more proportionate burden sharing, including 2020 emissions reduction targets for fast- growing economies like India, China and Brazil, and low-income developing countries;
  • sanctions against countries that do not live up to their emission reduction commmitments;
  • strong new international financial mechanisms and institutions to support these goals.

By contrast, in current policy negotiations these goals are either much less ambitious or absent altogether. Preparations for Copenhagen and Congressional debate on climate change legislation are both following a similar pattern of lowering ambitions and expectations, focusing on limited areas of current agreement and incremental steps, and deferring more contentious issues of targets, timetables, funding and enforcement until later.

"We are hearing from climate policymakers that it will take more time to do things right, that we have to meet people where they are instead of imposing radical reforms from  above," said Dr. Richard Sclove, the US advisor to WWViews. "But these results show the people are way ahead of the policymakers. If Congress and Copenhagen delegates want to act in accordance with citizen views, they have to do far more and go far faster, not scale back and slow down."

As Chamber loses members, its lobbying accelerates

While a number of its members left because of its stance on climate change, the U.S. Chamber of Commerce was pouring record amounts into lobbying efforts.

The chamber spent more than $34 million on lobbying in the third quarter, with a portion of that money paying for advocacy on energy and climate legislation.

"This represents an increase of 260 percent above what it spent on lobbying during the second quarter, and an increase of 12 percent above what it spent during the first three quarters of 2008," wrote Michael Beckel on a blog of the Center for Responsive Politics.

The release of the lobbying data came during a crazed week for the chamber, which witnessed an environmentalist activist group called the "Yes Men" holding a fake press conference on climate policy in its name (Greenwire, Oct. 19). That followed departures of companies like Apple Inc. and Exelon from the chamber in recent months because of their disagreements with the group's stance on global warming.

In a statement earlier this week, Thomas Collamore, the chamber's senior vice president for communications and strategy, said, "The U.S. Chamber believes that strong climate legislation is not incompatible with the goals of improving our economy and creating jobs."

WaPo: We can afford to save the planet

Here is the good news on the climate front: The Europeans have ratcheted down their emissions targets, the Chinese are getting serious about solar power and energy efficiency, and Washington is lumbering toward a carbon cap.

These are steps toward the long-held goal: cutting global warming pollution 80 percent by 2050. Such cuts would stabilize the thickness of the heat-trapping carbon dioxide blanket surrounding the planet at 450 parts per million (ppm) and, we've been told, ensure that the global average temperature increase would not exceed 2 degrees Celsius (3.6 degrees Fahrenheit) from 1990 levels.

The bad news? Turns out that 450 ppm is so 2005.

In the past four years, climate scientists, led by NASA's James Hansen, have dramatically altered the goal. To avoid the collapse of the continental ice-sheets and a dangerous rise in sea levels, many scientists are now saying we have to get down to 350 ppm, and quickly.

This means what was already a heroic (and to many, impossible) target has become mind-boggling. Reaching 350 ppm would require a 97 percent reduction in emissions, entailing a complete conversion to renewable energy systems by mid-century, with the world economy virtually free of carbon emissions. Such a goal is far more demanding than any of the leading policy proposals under discussion.

Game over?

No. It's just time to rethink what is possible.

Climate bill crunch time

A climate change bill will get top billing Friday with a critical meeting among Democratic leaders to set a timeline for debate, a major speech by President Barack Obama and release of a crucial impact study by the Environmental Protection Agency.

Massachusetts Democratic Sen. John Kerry, the lead sponsor of a Senate climate bill, plans to meet with Senate Majority Leader Harry Reid on Monday to set a timeline for committees to finish work on the legislation – possibly as soon as Thanksgiving. And Environment and Public Works Chairwomen Sen. Barbara Boxer said she plans to release new sections of the climate bill that she co-authored with Kerry on Friday. The release of her bill comes as the EPA is set to release a study of the economic impact of the Senate version of the global warming legislation.

While Democratic senators make their push in Washington, Obama will deliver a speech on clean energy and climate change at the Massachusetts Institute of Technology.

The flurry of activity around a bill that has suffered on the back burner during the health care debate gives environmentalists hope that the Senate could make substantial progress on a bill before international climate talks scheduled for December in Copenhagen.

White House encouraged by climate bill status

The White House is encouraged by progress on a climate change bill in the Senate and is working to advance it even if a December deadline passes, an aide to President Barack Obama said on Thursday.

Carol Browner, Obama's top adviser on climate and energy issues, told Reuters that White House officials were reaching out to Democratic and Republican senators in an aggressive push to move the bill forward.

"There have been some bipartisan conversations that we find very encouraging," Browner said in an interview. "We are going to continue to do everything in our power to keep this moving."

If a law is not passed by the time U.N. talks on a global warming pact begin in December in Copenhagen, the United States would still have a strong position on the issue in the negotiations, she said.

"Wherever we are in the process, we will be able to manage in Copenhagen."

Browner, who has expressed doubts that a bill would become law by December, said U.S. negotiators would stress Obama's domestic initiatives on climate change and renewable energy since coming into office.

"We'll have been in office by the time we get there, what, 10 months? And yet if you look at what we've accomplished, its quite significant," she said.

European countries and environmentalists want Washington to do more to encourage the Copenhagen talks.

Obama's presence at the talks would help. British Prime Minister Gordon Brown has said he would go and called on other world leaders to attend, too.

But Browner said the time was not right to make that call. "As the president himself has said, it's just too early to make that decision," she said.

UK Foreign Secretary accuses public of climate change apathy

The Foreign Secretary accused the public yesterday of lacking a sense of urgency in the face of the potentially devastating consequences of climate change.

David Miliband said that people had grown apathetic about the issue when they needed to be galvanised into action before the Copenhagen climate change summit in December.

"For a lot of people the penny hasn't dropped that this climate change challenge is real and is happening now," he said. "There isn't yet that feeling of urgency and drive and animation about the Copenhagen conference."

Mr Miliband and his brother, Ed Miliband, the Climate Change Secretary, were opening an exhibition at the Science Museum in South Kensington designed to illustrate the potential impact of world temperatures increasing by 4C. Current models predict that this could happen by 2060 if no action is taken.

He stood by the Government's hard-hitting public information broadcast to promote the Government's Act on CO2 initiative.

The Greening of China

China and India agreed Oct. 22 to coordinate their efforts on climate change. The two countries are at one in holding developed countries responsible for taking the lead in cutting emissions. As the largest carbon emitter, China is being watched particularly closely in the approach to the December Copenhagen summit on climate change to see what position it will adopt.

Common Position

China's carbon emissions are said to have surpassed those of the U.S. in 2007, making it the world's largest contributing country and a key participant at the U.N. Climate Summit in Copenhagen this December:

–On Sept. 22, President Hu Jintao said China would cut carbon dioxide (CO2) emissions per unit of GDP by a "notable margin" by 2020. This has raised expectations that China might make a commitment to mandatory emissions cuts.

–On Oct. 14, Vice Premier Li Keqiang stressed the principle of "common but differentiated responsibilities," which replicated the standard position on climate change from the mid-1990s.

Entering into a five-year agreement yesterday, China and India are making common cause on climate change, which will add to the weight developing countries will have at Copenhagen. The two sides maintain that:

–developed countries carry primary responsibility for cutting emissions;

–caps should not be imposed, because development is their priority; and

–developed countries should provide financial and technological resources to industrializing countries to help them control emissions.

Watch Obama's big clean energy speech live at 12:25 ET today

Posted: 23 Oct 2009 08:52 AM PDT

Hunters and anglers rally for climate bill — they see first-hand the impact of human-caused global warming

Posted: 23 Oct 2009 07:35 AM PDT

A recent poll by the National Wildlife Federation, which counts more than 420,000 members across 42 states, found that 66 percent of hunters and anglers surveyed believed that global warming was already occurring.

A Gallup poll in March 2009 found that only 53 percent of the general population shared the same view.

People who spend a lot of their time outdoors are more likely to see the obvious — the climate is changing and invasive species like the bark beetle are ravaging the West.  That's a key point of this piece in the NYT blog, Green Inc:

Photo

More than 13,000 hunters and anglers from across the country joined a "virtual town hall" teleconference on Tuesday to hear a discussion of the impact of climate change on fish and wildlife populations, and to voice their support for federal action to limit carbon emissions.

The call was hosted by the National Wildlife Federation Action Fund, American Hunters and Shooters, and the Theodore Roosevelt Conservation Partnership.

"It's very important in my opinion that we do pass the climate change bill," said Ted Roosevelt IV, a prominent conservationist and the great-grandson of President Theodore Roosevelt, during the phone call.

The virtual meeting is part of a recent wave of climate activism by national hunting and fishing groups, whose conservative-leaning membership has expressed growing concern with the impacts of climate change on wildlife.

It's great to see a broader group of the population starting to engage in what will be the central issue of our time.  But then, for outdoorsmen and -women, the changes driven by human emissions are all-but-impossible to miss:

With their pastime bringing them close to the landscape, hunters and anglers are encountering changes in nature associated with the onset of climate change, from alteration in the seasons and the migratory patterns of animals, to increasingly intense wildfires across broad the West.

"We're already seeing the effects from climate change," said George Cooper, the president of the Theodore Roosevelt Conservation Partnership.

John Warner, a former Republican senator from Virginia who co-sponsored an unsuccessful carbon cap-and-trade bill with Senator Joseph Lieberman in 2007, recounted his own personal encounter with the impacts of climate change during the call.

Mr. Warner, a lifelong hunter and fisherman, described working for the Forest Service in the Idaho panhandle in the 1940s, in "pristine forests" where streams teemed with fish.

When he returned to Idaho several years ago, he said, he found the same forests decimated by the invasion of the pine beetle, whose spread has been linked in part to rising temperatures in winter.

"It was one of the saddest trips of my life," said Mr. Warner.

Responding to a question from a hunter in Michigan about the prospects for Republican support for climate change legislation recently introduced in the Senate, Mr. Warner said he was hopeful the bill would receive bipartisan support, which may be crucial to its passage.

"I think we're going to see Republican participation," he said. "It would be a tragic situation for a bill to move through strictly on a partisan basis."

One goal of hunting and fishing groups is to secure dedicated funding for state wildlife agencies for "adaptive management" practices, which aim to reduce the impact of climate change on wildlife and wilderness areas.

The Waxman-Markey climate and energy bill contains provisions establishing a National Adaptation Council and National Climate Change Adaptation Program. Funding would come from a portion of proceeds from the sale of emission permits.

Chris Wood, the chief operating officer of Trout Unlimited, a sport fishing group with more than 140,000 members in 400 chapters across the country, said most members support the group's lobbying efforts on Capitol Hill in support of climate legislation — though he has received a few angry letters.

"In a couple of cases it's been vocal," he said. "It's been incidental to the support that we've been getting from the vast majority of members who are concerned about this."

If we don't act fast enough, human-caused climate change will wipe out the majority of species on land and sea, and turn a livable climate into "Hell and High Water."

Inhofe's climate change-denying Copenhagen 'truth squad' expands to a 'truth squad of three.'

Posted: 23 Oct 2009 06:47 AM PDT

From Think Progress

Last month, Sen. James Inhofe (R-OK) announced that he would travel to Copenhagen in December to act as a climate skeptic "truth squad" during international climate change treaty negotiations. "I think somebody has to be there — a one-man truth squad," Inhofe said on CSPAN. Today, on Bill Bennett's radio show, Inhofe revealed that his delegation has expanded to "a truth squad of three":

BENNETT: And John Barrasso's going with you, right? John Barrasso?

INHOFE: Yeah, Barrasso and there's another secret person going with me. We're going to have a team of three, a truth squad of three.

[JR Note:  Sen. Barrasso (R-WY) is the guy who tryied to block intelligence on the national security threat posed by climate change.]

Listen here:

When Inhofe first announced his plans for a "truth squad," TPM's Eric Kleefeld remarked, "It's nice to see how seriously foreign policy is taken these days — when a member of the political minority will send his own delegation to an international conference, in order to undermine the government and tell other countries that they can't work with the United States." Now it's at least two members of the political minority.

That Wolf Will Come Back to Bite You

Posted: 23 Oct 2009 06:30 AM PDT

No wonder polling shows more people don't know the scientific evidence that humans are warming the Earth has grown stronger. Revkin stunner on NPR: "I've made missteps. I've made probably more mistakes this year in my print stories than I had before."

Posted: 22 Oct 2009 04:30 PM PDT

UPDATE:  Yes, bad coverage by big media, including the NYT's Revkin, is one reason there has been a modest decline since April 2008 in the number of Americans who know that there is solid (in fact, overwhelming) evidence the Earth is warming and humans are the primary cause (see here).  Big media "did" the global warming story in 2006 and 2007 when Gore's movie came out and then throughout 2007 when the IPCC released its four major summary reports.  Looking for a new angle, the NY Times and others played up the global cooling myth.  Now couple that with a ramped up disinformation campaign from the deniers who keep repeating the global cooling myth and continued lame messaging from the scientific community (see "Why scientists aren't more persuasive, Part 1") and a progressive community filled with people who have been persuaded by bad analysis that they shouldn't even talk about "global warming" (see Messaging 101b: EcoAmerica's phrase 'our deteriorating atmosphere' isn't going to replace 'global warming' — and that's a good thing).  That's a recipe for an underinformed public.

I have serious doubts whether major journalists should be blogging very much.  It conflates different roles, which can be confusing to the reader, and I've always thought that the media's blogging was inherently lower quality journalism but still imprinted with the credibility of the journalist and his or her media organization (see "What exactly is the difference between journalism and blogging?").

Today's remarkble NPR interview of top NY Times climate reporter Andrew Revkin underscores my doubts and introduces yet another major problem I hadn't considered — sagging quality of the print reporting as a result of too much time spent blogging.  Or, in Andy's case, he's apparently doing the same amount of blogging but more print reporting.

Revkin says "I've been in print more, but I haven't slowed down on the blog."  The impact:

"I've made missteps. I've made probably more mistakes this year in my print stories than I had before.  That's kind of frustrating."

You aren't the only one who is frustrated, Andy!

The published articles reach a vastly larger audience.  I'd gladly do without every one of Andy's posts at his blog, many of which are quite informative — in return for his not repeatedly screwing up the facts and the framing of those facts in just one recent story, see "NYT's Revkin pushes global cooling myth (again!) and repeats outright misinformation."

I suspect (or, at least, hope) that if he had had more time to get the facts right, he might not have written that story at all or it would have completely reframed it.  And yes, if you check the sentences I said were wrong or misleading, he went back and changed every single one of them — although the change to the key opening sentence was just adding one word, "relatively," which is quite inadequate:

… global temperatures have been relatively stable for a decade and may even drop in the next few years.

That is still very misleading, with the phrase "relatively stable for a decade" not actually based on scientific data and the phrase "may even drop" not supported by the recent scientific literature, including the work of the one person Andy cites, Mojib Latif (see "Exclusive interview with Dr. Mojib Latif, the man who confused the NY Times and New Scientist").

[I still haven't seen the print edition of that story -- if someone can find it and send me the PDF, I'd love to see it.  I think my blog post was too late to correct the print story.]

Let me end with a general statement I made after the terrific journalist James Fallows made some errant statements on climate (see "James Fallows, Physics for Future Presidents, Al Gore, blogging journalists, and what will become of hockey sticks on an ice-free planet?"):

Blogging journalists.  Now that global warming and clean energy have become a first-tier political issue, every major journalist is writing about it.  My unsolicited advice: This is the story of the century, so you should be writing about it, but it has many mine fields so please do your homework before opining on it….

FINAL NOTE TO MEDIA:  Time for you to go back to the basics of reporting the science.  You might stop the blogging and start with this story — 18 leading scientific organizations send letter to Senators affirming the climate is changing, "human activities are the primary driver," impacts are projected to worsen "substantially" and "If we are to avoid the most severe impacts of climate change, emissions of greenhouse gases must be dramatically reduced."

Related Posts:

Confusion in Senate regarding allowance allocation

Posted: 22 Oct 2009 04:15 PM PDT

… let's be clear that, first, for the most part, the allocation of allowances affects neither the environmental performance of the cap-and-trade system nor its aggregate social cost….

Third, we should be honest that the legislation, for all its flaws, is by no means the "massive corporate give-away" that it has been labeled.  On the contrary, more than 80% of the value of allowances accrue to consumers and public purposes, and less than 20% accrue to covered, private industry.  This split is roughly consistent with the recommendations of independent economic research.

The above quote is from a May analysis of the Waxman-Markey clean energy and climate bill by Harvard University's Robert Stavins — who is certainly not anyone's idea of a progressive economist (see here and here), although he is obviously one of the country's leading economic experts on cap-and-trade.

Some commenters here and elsewhere have described the allocation distribution in the climate bill as a big giveaway to polluters.  The most credible progressive experts I know on energy economics dispute that description (see "Preventing windfalls for polluters but preserving prices — Waxman-Markey gets it right").

Today, Stavins posted "Confusion in the Senate Regarding Allowance Allocation," which notes:

According to an October 22nd  story in Environment & Energy Daily ("Climate:  GOP Fence Sitters Voice Concerns Over Allocations" by Darren Samuelson), several key swing-vote Senate Republicans — including Senator Lisa Murkowski, ranking member of the Energy and Natural Resources Committee — are voicing skepticism about the Senate's Boxer-Kerry climate bill's cap-and-trade system because of the free allocation of some of the allowances to various recipients in the private (and public) sector.

There may be sound reasons for concern about the developing Senate bill, but the so-called "free allocation" should not be one of them.  Indeed, this debate is unfortunately repeating the confusion which was prevalent in the press and the blogosphere about the allowance allocation in the Waxman-Markey legislation in the House of Representatives (H.R. 2454).

Rather than being a "massive corporate give-away" of 80% of the allowances to private industry — as it was frequently characterized — the H.R. 2454 allowance allocation would result in precisely the opposite, namely, about 80% of the value of allowances accruing to consumers, small business, and public purposes, and some 20% accruing to covered, private industry (a split which is roughly consistent with the recommendations from independent economic research).

And directly to Senator Murkowski's and others' concern, the nature of the free allocation of allowances does not — with some relatively minor exceptions — affect either the environmental performance or the overall social cost of the system.

The deal-making that took place in the House and will take place in the Senate for shares of the allowances for various purposes is a good example of the useful, important, and fundamentally benign mechanism through which a cap-and-trade system provides the means for a political constituency of support and action to be assembled (without reducing the policy's effectiveness or driving up its cost).

I have explained all of this carefully in a previous post, and so rather than repeat it here, I offer this link to my post from May 27th on "The Wonderful Politics of Cap-and-Trade:  A Closer Look at Waxman-Markey."

Unlike Stavins, I think it's worth excerpting most of (rather than just linking to) what he wrote back then:

Despite all the hand-wringing in the press and the blogosphere about a political "give-away" of allowances for the cap-and-trade system in the Waxman-Markey bill voted out of committee last week, the politics of cap-and-trade systems are truly quite wonderful, which is why these systems have been used, and used successfully.The Waxman-Markey allocation of allowances has its problems, which I will get to, but before noting those problems it is exceptionally important to keep in mind what is probably the key attribute of cap-and-trade systems:  the allocation of allowances — whether the allowances are auctioned or given out freely, and how they are freely allocated — has no impact on the equilibrium distribution of allowances (after trading), and therefore no impact on the allocation of emissions (or emissions abatement), the total magnitude of emissions, or the aggregate social costs.  (Well, there are some relatively minor, but significant caveats – those "problems" I mentioned — about which more below.)  By the way, this independence of a cap-and-trade system's performance from the initial allowance allocation was established as far back as 1972 by David Montgomery in a path-breaking article in the Journal of Economic Theory (based upon his 1971 Harvard economics Ph.D. dissertation). It has been validated with empirical evidence repeatedly over the years.

Generally speaking, the choice between auctioning and freely allocating allowances does not influence firms' production and emission reduction decisions.  Firms face the same emissions cost regardless of the allocation method.  When using an allowance, whether it was received for free or purchased, a firm loses the opportunity to sell that allowance, and thereby recognizes this "opportunity cost" in deciding whether to use the allowance.  Consequently, the allocation choice will not influence a cap's overall costs.

Manifest political pressures lead to different initial allocations of allowances, which affect distribution, but not environmental effectiveness, and not cost-effectiveness.  This means that ordinary political pressures need not get in the way of developing and implementing a scientifically sound, economically rational, and politically pragmatic policy.  Contrast this with what would happen when political pressures are brought to bear on a carbon tax proposal, for example.  Here the result will most likely be exemptions of sectors and firms, which reduces environmental effectiveness and drives up costs (as some low-cost emission reduction opportunities are left off the table).  Furthermore, the hypothetical carbon tax example is the norm, not the exception.  Across the board, political pressures often reduce the effectiveness and increase the cost of well-intentioned public policies.  Cap-and-trade provides natural protection from this.  Distributional battles over the allowance allocation in a cap-and-trade system do not raise the overall cost of the program nor affect its environmental impacts.

In fact, the political process of states, districts, sectors, firms, and interest groups fighting for their share of the pie (free allowance allocations) serves as the mechanism whereby a political constituency in support of the system is developed, but without detrimental effects to the system's environmental or economic performance.  That's the good news, and it should never be forgotten.

But, depending upon the specific allocation mechanisms employed, there are several ways that the choice to freely distribute allowances can affect a system's cost.  Here's where the "caveats" and "problems" come in.

First, auction revenue may be used in ways that reduce the costs of the existing tax system or fund other socially beneficial policies.  Free allocations to the private sector forego such opportunities.  Below I will estimate the actual share of allowance value that accrues to the private sector.

Second, some proposals to freely allocate allowances to electric utilities may affect electricity prices, and thereby affect the extent to which reduced electricity demand contributes to limiting emissions cost-effectively.  Waxman-Markey allocates allowances to local distribution companies, which are subject to cost-of-service regulation even in regions with restructured wholesale electricity markets.  So, electricity prices would likely be affected by these allocations under existing state regulatory regimes.  The Waxman-Markey legislation seeks to address this problem by specifying that the economic value of the allowances given to electricity and natural gas local distribution companies should be passed on to consumers through lump-sum rebates, not through a reduction in electricity rates, thereby compensating consumers for increases in electricity prices, but without reducing incentives for energy conservation.

Third, and of most concern in the context of the Waxman-Markey legislation, "output-based updating allocations" provide perverse incentives and drive up costs of achieving a cap.  This merits some explanation.  If allowances are freely allocated, the allocation should be on the basis of some historical measures, such as output or emissions in a (previous) base year, not on the basis of measures which firms can affect, such as output or emissions in the current year.  Updating allocations, which involve periodically adjusting allocations over time to reflect changes in firms' operations, contrast with this.

An output-based updating allocation ties the quantity of allowances that a firm receives to its output (production).  Such an allocation is essentially a production subsidy.  This distorts firms' pricing and production decisions in ways that can introduce unintended consequences and may significantly increase the cost of meeting an emissions target.  Updating therefore has the potential to create perverse, undesirable incentives.

In Waxman-Markey, updating allocations are used for specific sectors with high CO2 emissions intensity and unusual sensitivity to international competition, in an effort to preserve international competitiveness and reduce emissions leakage.  It's an open question whether this approach is superior to an import allowance requirement, whereby imports of a small set of specific commodities must carry with them CO2 allowances.  The problem with import allowance requirements is that they can damage international trade relations.  The only real solution to the competitiveness issue is to bring non-participating countries within an international climate regime in meaningful ways.  (On this, please see the work of the Harvard Project on International Climate Agreements.)

Also, output-based allocations are used in Waxman-Markey for merchant coal generators, thereby discouraging reductions in coal-fired electricity generation, another significant and costly distortion.

Now, let's go back to the hand-wringing in the press and blogosphere about the so-called massive political "give-away" of allowances.  Perhaps unintentionally, there has been some misleading press coverage, suggesting that up to 75% or 80% of the allowances are given away to private industry as a windfall over the life of the program, 2012-2050 (in contrast with the 100% auction originally favored by President Obama).

Given the nature of the allowance allocation in the Waxman-Markey legislation, the best way to assess its implications is not as "free allocation" versus "auction," but rather in terms of who is the ultimate beneficiary of each element of the allocation and auction, that is, how the value of the allowances is allocated.  On closer inspection, it turns out that many of the elements of the apparently free allocation accrue to consumers and public purposes, not private industry.

First of all, let's looks at the elements which will accrue to consumers and public purposes.  Next to each allocation element is the respective share of allowances over the period 2012-2050 (measured as share of the cap, after the removal – sale — of allowances to private industry from a "strategic reserve," which functions as a cost-containment measure.):

a.  Electricity and natural gas local distribution companies, 22.2%

b.  Home heating oil/propane, 0.9%

c.  Protection for low- and moderate-income households, 15.0%

d.  Worker assistance and job training, 0.8%

e.  States for renewable energy, efficiency, and building codes, 5.8%

f.   Clean energy innovation centers, 1.0%

g.  International deforestation, clean technology, and adaptation, 8.7%

h.  Domestic adaptation, 5.0%

The following elements will accrue to private industry, again with average (2012-2050) shares of allowances:

i.   Merchant coal generators, 3.0%

j.   Energy-intensive, trade-exposed industries, 8.0%

k.  Carbon-capture and storage incentives, 4.1%

l.   Clean vehicle technology standards, 1.0%

m. Oil refiners, 1.0%

The split over the entire period from 2012 to 2050 is 59.4% for consumers and public purposes, and 17.1% for private industry.  This 17% is drastically different from the suggestions that 70%, 80%, or more of the allowances will be given freely to private industry in a "massive corporate give-away."

All categories – (a) through (m), above – sum to 76.5% of the total quantity of allowances over the period 2012-2050.  The unallocated allowances — 23.5% over 2012 to 2050 — are scheduled in Waxman-Markey to be used almost entirely for consumer rebates, with the share of available allowances for this purpose rising from approximately 10% in 2025 to more than 50% by 2050.  Thus, the totals become 82.9% for consumers and public purposes versus 17.1% for private industry, or approximately 80% versus 20% — the opposite of the "80% free allowance corporate give-away" featured in many press and blogosphere accounts.  Moreover, because some of the allocations to private industry are – for better or for worse – conditional on recipients undertaking specific costly investments, such as investments in carbon capture and storage, part of the 17.1% free allocation to private industry should not be viewed as a windfall.

Speaking of the conditional allocations, I should also note that some observers (who are skeptical about government programs) may reasonably question some of the dedicated public purposes of the allowance distribution, but such questioning is equivalent to questioning dedicated uses of auction revenues.  The fundamental reality remains:  the appropriate characterization of the Waxman-Markey allocation is that more than 80% of the value of allowances go to consumers and public purposes, and less than 20% to private industry.

Finally, it should be noted that this 80-20 split is roughly consistent with empirical economic analyses of the share that would be required – on average — to fully compensate (but no more) private industry for equity losses due to the policy's implementation.  In a series of analyses that considered the share of allowances that would be required in perpetuity for full compensation, Bovenberg and Goulder (2003) found that 13 percent would be sufficient for compensation of the fossil fuel extraction sectors, and Smith, Ross, and Montgomery (2002) found that 21 percent would be needed to compensate primary energy producers and electricity generators.

In my work for the Hamilton Project in 2007, I recommended beginning with a 50-50 auction-free-allocation split, moving to 100% auction over 25 years, because that time-path of numerical division between the share of allowances that is freely allocated to regulated firms and the share that is auctioned is equivalent (in terms of present discounted value) to perpetual allocations of 15 percent, 19 percent, and 22 percent, at real interest rates of 3, 4, and 5 percent, respectively.  My recommended allocation was designed to be consistent with the principal of targeting free allocations to burdened sectors in proportion to their relative burdens, while being politically pragmatic with more generous allocations in the early years of the program.

So, the Waxman-Markey 80/20 allowance split turns out to be consistent  — on average, i.e. economy-wide — with independent economic analysis of the share that would be required to fully compensate (but no more) the private sector for equity losses due to the imposition of the cap, and consistent with my Hamilton Project recommendation of a 50/50 split phased out to 100% auction over 25 years.

Going forward, many observers and participants in the policy process may continue to question the wisdom of some elements of the Waxman-Markey allowance allocation.  There's nothing wrong with that.

But let's be clear that, first, for the most part, the allocation of allowances affects neither the environmental performance of the cap-and-trade system nor its aggregate social cost.

Second, questioning should continue about the output-based allocation elements, because of the perverse incentives they put in place.

Third, we should be honest that the legislation, for all its flaws, is by no means the "massive corporate give-away" that it has been labeled.  On the contrary, more than 80% of the value of allowances accrue to consumers and public purposes, and less than 20% accrue to covered, private industry.  This split is roughly consistent with the recommendations of independent economic research.

Fourth and finally, it should not be forgotten that the much-lamented deal-making that took place in the House committee last week for shares of the allowances for various purposes was a good example of the useful, important, and fundamentally benign mechanism through which a cap-and-trade system provides the means for a political constituency of support and action to be assembled (without reducing the policy's effectiveness or driving up its cost).

Although there has surely been some insightful press coverage and intelligent public debate (including in the blogosphere) about the pros and cons of cap-and-trade, the Waxman-Markey legislation, and many of its design elements, it is remarkable (and unfortunate) how misleading so much of the coverage has been of the issues and the numbers surrounding the proposed allowance allocation.

NRC: Burning fossil fuels costs the U.S. $120 billion a year — not counting mercury or climate impacts!

Posted: 22 Oct 2009 01:01 PM PDT

Coal wall

A new report from the National Research Council examines and, when possible, estimates "hidden" costs of energy production and use — such as the damage air pollution imposes on human health — that are not reflected in market prices of coal, oil, other energy sources, or the electricity and gasoline produced from them.  The report estimates dollar values for several major components of these costs.  The damages the committee was able to quantify were an estimated $120 billion in the U.S. in 2005, a number that reflects primarily health damages from air pollution associated with electricity generation and motor vehicle transportation.  The figure does not include damages from climate change, harm to ecosystems, effects of some air pollutants such as mercury, and risks to national security, which the report examines but does not monetize.

As the Senate gears up to discuss clean energy legislation this fall, the Senate may have—despite its awareness—another healthcare debate on its hands.  If we cannot direct our use of energy towards those forms that do not carry hidden burdens, we better hope that Americans have good health insurance.

The National Research Council, an arm of the National Academy of Sciences, recently found that our current level of energy use is costing us a lot more than our environment—it is also costing us our health. In the newly released "The Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use," the NRC explores the external costs of energy, costs that are certainly not factored into its market price.  Requested by Congress in the Energy Policy Act of 2005, the report reveals that there are substantial "hidden" costs to our energy production and use, primarily reflected in damages to human health. The report monetizes these unseen energy costs at $120 billion annually by tracing the full cycle of our energy use—extraction, development, deployment, and waste. These costs result in the death of 20,000 people each year—10,000 due to coal alone.

The NRC reports that most of the "hidden" costs of energy are attributed to coal-fired electricity generation and motor vehicle transportation—they extract an annual toll of $62 billion and $56 billion, respectively. In reporting its cost figures, the NRC only included the estimates for the non-climatic costs imposed by our energy use, specifically those costs related to health, agriculture, and built infrastructure. Although other pernicious side-effects of our energy use—such as ecosystem disruption, other pollutants (like mercury), and national security risks—impose costs to Americans, these environmental costs were examined in the report but were excluded from the final cost figures. (Note: this actually made the reported costs much clearer due to the panoply of possible monetary values the NRC calculated for these other damages). The conclusion is resoundingly clear: our current energy use has implications for much more than debates about the climate.

The punch line? Coal-fired power plants and motor vehicle transportation account for roughly $118 billion of non-climatic damage to the U.S. each year. Natural gas, which accounts for 20% of our nation's electricity generation and the "vast majority" of heating demands, only costs us a little over $2 billion dollars annually in unseen costs (also note that the Energy Information Administration projects that the market price of natural gas will be 14.6 times lower than that of oil through 2030). Comparatively, the report shows, renewable energy (wind, solar, geothermal, etc.) costs us very little in external damages. With a tremendous renewable energy potential and an abundant untapped supply of natural gas, the U.S needs to—and can!—reduce these hidden energy costs by generating clean energy that does not obscure the real costs of its production and use.

Jonathan Aronchick, an intern for the Energy Opportunity team at the Center for American Progress.

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