It’s the ECONOMY, Stupid

Let’s talk about something silly.

There appears to be a persistent subset of people who are convinced that the science on global warming is not conclusive, and that consequently, the sacrifices demanded by higher fuel-efficiency standards and renewable energy mandates are not proportional to the benefits.

This tickles me, because this just in: changing our nation’s energy policy isn’t about the environment.

I mean, it is a little bit. But environmental implications are only a small consideration in the energy policy picture. Without even considering global warming, we still need a better way of meeting this century’s energy needs. Don’t believe me? Come back after your next fill-up.

The big question today is whether or not America should increase domestic oil production. While I think it can be healthy to reevaluate policy positions based on the current state of affairs, the problem is that drilling for more oil is neither a quick fix nor a long-term solution. Getting at oil isn’t like rummaging through the sofa cushions for spare change; it’s building a skyscraper. Even the best case scenario has it taking a few years before American oil makes it to American consumers, with a negligible impact on price (this prediction by the DOE on the effects of opening ANWR has the price per barrel decreasing by less than $1.50 in 2027).

Ignoring global warming implications and the environmental damage that might be done by drilling for more oil, some people might still think that drilling is a good idea. I (mostly) respect that, but let’s be clear about what we’re talking about. If we started drilling yesterday, it will still cost you a hundred bucks to fill up your gas tank into the foreseeable future. In fact, my boy Robert J. Samuelson over at the Washington Post cites economist Jeffrey Rubin’s prediction that $7 gallons of gas and $225 barrels of oil are coming soon to a theater near you. This is not meant to frighten (well, Samuelson is trying to scare you into drilling, but that’s not my point at all). Rather, it illustrates the serious economic effects of our dependence on oil.

Building better cars and developing renewable energy sources, on the other hand, is quite simply sound economic policy. Once in place, they will be much less susceptible to price fluctuations. The word I remember hearing fifth most-often in my introductory econ classes (after “the,” “supply,” “and” “demand”) was EFFICIENCY. In theory, or so I was told, markets will tend toward more efficient uses of labor, raw materials, capital, and other things that go into making markets.

The chorus that industry and others have been repeating for years is that renewable technology isn’t ready, is in fact decades away, and so isn’t part of a realistic energy plan. Well, ignoring the fact that limited investment in these technologies (relative, say, to oil subsidies) hasn’t helped, we’re now faced with a situation in which carbon solutions are years away. I’m willing to hear you out if you think that we should look at pursuing multiple options to alleviate today’s high fuel prices. But don’t try to defeat renewables as part of the solution by claiming that they’re not ready. Firstly, some renewables are ready. Secondly, domestic oil and gas isn’t ready either, and saying otherwise is not just dumb, it’s deceitful.

A new energy policy isn’t so much about spending more government money, it’s about spending government money differently. The energy industry today is subsidized. There are a number of reasons for this, and I choose to ignore the conspiracy theories. (Okay, I don’t ignore them. I love a good conspiracy theory. The Illuminati faked the moon landing at Area 51!) But if we accept at face value arguments that these subsidies are intended to protect consumers and stimulate our economy, then I think that the subsidies aren’t really getting the job done these days. There’s no way of ensuring that these benefits get passed on to consumers, even in part.

So, here’s a radical proposal: let’s take the money that currently is going to oil subsidies and spend it on something else. Perhaps, and this is crazy, I know, but perhaps we could spend it on things that will help energy consumers and stimulate the economy. Like… green investment. By subsidizing fuel efficient cars and clean energy development, we can both create jobs and give individuals the power to lower their own energy bills. For example, the Union of Concerned Scientists asserts that we can reduce our fuel consumption by more oil than exists in ANWR just by implementing better mile-per-gallon standards, using technology we already have. Put that in your pipe and subsidize it. At the very least, renewable energy isn’t going to be competitive with carbon-based energy if it’s not a fair fight. And seriously, if we’re giving one side an advantage, why would we favor the technology that has the effect of causing climate problems, contributing to international instability and making exorbitant profits for a few at the expense of American consumers?

You can get back to me on that.

 

Leggo My Eggo! Energy Legislation as Part of a Balanced Breakfast

I have a lot to say about global warming deniers. Most of it, however, I will save for later, because something even more horrifying has come to my attention.

Global warming’s effects on New England winters are putting the maple syrup industry in serious jeopardy.

Maybe you don’t believe in global warming, but this is MAPLE SYRUP we’re talking about here. Are you really comfortable taking chances? If polar bears aren’t your cup of tea, then I hope at least the fate of the McGriddle gets your attention. This must be stopped.

Okay, so there’s probably nothing even remotely resembling real maple syrup in a McGriddle. But I think you get my point. Wait, you don’t? Alright, well here it is. Most people can’t even begin to truly understand all of the far-reaching implications of global climate change. To the nay-sayers: you’re right. We don’t know enough. But what we do know is scaring the bejeebus out of me, and I’m not the only one.

Climate change is a little like eating Play-Doh. I don’t really know if it’s bad for you, but I doubt that it’s good. I’m not going to wait for the lab results before I decide not to eat it. Even if I’m really hungry and it’s right there in front of me (smelling a little bit weird, which should be my first hint that I don’t want to be digesting it).

Oh wait; you’ve never had the desire to eat Play-Doh? (What kind of a childhood did you have? What kind of a childhood did I have?) Well, I’ve never had the desire to build a coal plant. So there.

All of this brings us to the Senate’s debate over what to do about energy policy. I use the phrase ‘debate about energy policy’ loosely, because it’s actually a debate about whether or not to have a debate. The law cracks me up. This ‘debate’ reminds me of the old cliché about how laws are like sausages (you don’t want to see how they’re made). The issue du jour is a tax bill that will, among other things, extend tax incentives for renewable energy.

There will be another cloture vote tonight. It will likely involve more posturing and more grandstanding. At stake is billions of dollars and somewhere around 116,000 jobs. Even if you don’t take the specter of global warming seriously, shouldn’t the economic livelihood of over one hundred thousand Americans lead to a sense of urgency?

What will happen is anyone’s guess. The conventional wisdom is that you don’t want to watch the political process. But then again, maybe if more people knew how our laws were made, we wouldn’t have to worry that there was Play-Doh in our sausages.

Just some food for thought.

 

The Right Stuff

In honor of the New Kids on the Block being back 2gether (OMG!!!!11! …but seriously, who saw that coming?), I’m giving some love to the National Review. Yeah, okay, that was a really crappy connection. But I love me some pop culture references. VH1: call me! Anywho… Victor Davis Hanson did a really thoughtful analysis about, what else, energy policy. His argument? The energy revolution (as some have taken to calling it) is bad for traditionally disadvantaged people, namely the poor.

There is a dangerous potential for there to be some truth to this, but it is not a foregone conclusion. I wrote the other day that not all cap-and-trade policies are created equal, and the effects that different versions will have on the poor is the great distinguishing factor.

Environmental types don’t necessarily like to talk about this. They’ll change the subject to rich people driving Hummers, while ignoring the fact that it’s rich people driving Priuses as well. The fact of the matter is, the details will matter a great deal in terms of the feasibility and fairness of a cap-and-trade program.

Many low-income people are already hurting thanks to rising gas and energy costs. Hanson advocates tapping into U.S. oil reserves in order to alleviate these stresses. Unless clean energy advocates can come up with a climate-friendly solution to these economic challenges (and an economy-friendly energy policy), the movement is going to be both powerless and disliked – and with good reason.

Rising energy prices are not merely one consequence of some types of cap-and-trade policies; for many, it is the only consequence that matters. What good is a safe environment in thirty years (when Jimmy Eat World is doing their reunion tour) when you have to choose between gas to get to work and feeding your family today? Environmentalists and others: the solution to global warming cannot be in the form of tough love.

Hanson’s conclusion, however, is that we – the world, liberals, whatever – have to pick between saving the environment and reducing energy prices (aka, helping poor people). Unless we want to pay nine dollars for a gallon of gas (like the Dirty Liberals want you to!), we should drill off the coast of Florida, global warming be damned.

Ouch.

This will remain a seductive argument until the clean energy movement can step up with a united voice and give an actionable plan for fighting global warming and poverty at the same time. ‘Green jobs’ doesn’t really mean anything concrete (unless we’re talking about the aprons at the Starbucks); higher gas prices are very real and easy to understand.

An assumption that I’m about to make here is that the proceeds from an auction will be returned to The People. Many from all across the political spectrum would rather go on a pork shopping spree with this money. No! Bad lobbyist!

Energy prices will rise under a cap-and-trade system. If the carbon permits are given away, then utility companies will pocket the difference, all the while complaining about the restrictions placed on them. If the permits are auctioned off, then the proceeds can be returned to people on a per capita basis. People with fewer appliances and smaller homes will see their energy bill increase a smaller amount than those with plasma TVs and other nifty toys, yet they will get the same rebate from the carbon permits per household member. This will translate into money back for the poorest Americans even after paying for their higher energy bills.

If we drill off the coast of Florida, oil executives will pocket huge profits. And let’s be clear, I’m not against people making money. But we’re talking here about helping the disadvantaged… and Hanson started it. Even if gas prices went down by as much as 20 cents a gallon, oil and energy bills are still going to be a huge fraction of low-income budgets. If we can give everyone a rebate – funded by carbon auctions – to help pay for rising energy costs, then lower income people will have more capital on-hand to weatherize their homes, make a down payment on a fuel efficient car, or whatever. Good [New] Deal.

 

Michele Bachmann: Isn’t It Ironic?

Not all cap-and-trade proposals are created equal.

But don’t try telling that to Minnesota Representative Michele Bachmann. In a commentary in today’s Minneapolis Star-Tribune, she weighs in with her views on Lieberman-Warner. Yet despite her best efforts, she does not even come close to making a case against cap-and-trade policies.

Central to her opposition is the allegation that cap-and-trade is really ‘tax-and-spend.’ Well, sort of. Though I would argue that carbon pricing is a tax in the same way that paying to use the U.S. Post Office is. It’s not a ‘tax’ for the sake of raising money; it’s a fee for a service.

Bachmann largely misses the mark in her criticisms of LW. She identifies problems with this bill without demonstrating at all convincingly that it is cap-and-trade policies that are flawed. Rather than approaching our energy needs with an open mind, she is all-too-eager to talk about what she believes cannot be done. I’m sure inspired. For example, she cites Europe’s problems with their own cap-and-trade system implemented a few years ago. This is roughly the rhetorical equivalent of having a doctor tell you that you’re having an allergic reaction and then leave the exam room. The question most people would ask next is: what’s causing it?

In Europe, permits were largely given away to companies, who were able to get permits for as much carbon as they said they needed. It reminds me, in more ways than one, of the Charmin commercial where the little bear takes too much toilet paper when left to his own devices. True, in both of these scenarios you really don’t want to undershoot, but it also meant that the system was entirely ineffective at limiting carbon emissions. However, in the words of the ever wise and only slightly bitter Alanis Morissette: “you live, you learn.” (Alanis probably didn’t say that first. But whoever did say it first probably didn’t play God in a Jay and Silent Bob movie. Who do you trust?)

Bachmann does identify a serious issue that will likely plague any U.S. energy legislation: China. China will, I’m sure, be the subject of future posts. Briefly, however, it is worth noting that ignoring our obligation to address energy here at home until China does something themselves is like cutting off our nose to spite our face. Or, even better, like waiting to get help for an addiction until Amy Winehouse does. If we can develop renewable technology that will cheaply meet our energy needs, then China’s clean energy future will stage a comeback. It can be done: just ask Britney Spears. I do want a piece of the new Britney! Supply and demand!

Sorry, I’m back. Really, Bachmann says it best herself:

There is no coherent reason to have to choose between economic growth and environmental protection. It’s a false notion that we must conserve our way out of our energy crisis, or pillage the environment. We can grow our economy, improve our energy security and pass on a clean natural heritage to our children.

Cap-and-trade doesn’t force a choice, it just makes the price of doing business reflect all the costs of doing business. This better valuation will grow our economy, improve our energy security and pass on a clean natural heritage to our children. Yes Alanis, it is a little bit ironic.

-Diana

 

Mo’ Coal, Mo’ Problems: A Lifetime Original Movie (Based on a True Story)

Anyone who says that government is boring has never been to a Minnesota Public Utilities Commission hearing. Okay, the hearing itself was boring. But paraphrased and with only a little bit of creative license, it was dramatic and occasionally humorous. In a really dark, Drop Dead Gorgeous kind of way.

Curtain up on a large room, with soft, mother-of-pearl walls and a nondescript carpet. At the front of the room sit five stoic commissioners. The chair leans forward to speak. “I’m most concerned about the ratepayer,” he begins. He then inquires about the costs of windmills and other renewable alternatives to coal.

The representative from the utility company appears absolutely gleeful about the opportunity just handed to him. “The price of renewables is escalating at a much higher rate than any other type of power,” he gasps.

The woman testifying on behalf of the various clean energy advocates bristles slightly. “Well, no. There have been no studies that have shown that conclusively.” She implies that further studies would be needed in order to make that assertion with the confidence that Mr. Utility had.

The chair pounces. He objects to the implication that more studies be done, which would mean more delays that would threaten his Yeoman ratepayers (though missing the point of the witness’s comment). Then he suddenly waxes nostalgic. “I’ve been doing this for a long time,” he muses. “And you can’t always go on the evidence. A certain amount of this is instinct, and comes from experience. Now I don’t want to talk about myself…” though clearly he did, “and about my wisdom and experience, but this job takes wisdom, and experience. And you can only get that wisdom from experience. Have I mentioned that I am wise and experienced?” He paused. “Well, I think this is a good time for a ten minute break.”

After the commission had reconvened, closing remarks were made.

The applicants emphasized that while they were not entirely confident in their cost estimates, the longer it took to break ground, the more it would cost to build the plant. “Delay is a poison pill,” they asserted. They acknowledged that some of the commissioners were not satisfied that they, the applicants, had satisfied their obligations of proof. Nonetheless, the project would die if it were not approved right away. “We urge the commission to grant the Certificate of Need,” they concluded. “If you make us come up with better numbers, it will take too long, and the sketchy numbers we have now will be even wronger!” The chair nodded knowingly.

With this, the commission entered into deliberations about the fate of the coal plant in question, called Big Stone II (appropriated abbreviated BSII). Specifically, the commission was to determine whether to issue a Certificate of Need allowing transmission lines to be built from the proposed plant in South Dakota. After some discussion about the regional nature of the project, and other serious federalism issues that kind of ruin my dramatization, the chair once again addressed the room.

“It would be easy to say no to this plant. That is the popular thing to do. But my job is to provide for the energy needs of the ratepayer. Not the needs of the entire planet, but the need of Minnesota. In fifty years, no one will remember who approved this plant. It’s not like I want eternal glory, per se, though donations to the Chair’s Foundations for Remembering the Life and Career of the Chair can be made after the hearing. Anyways, saying yes is the courageous thing to do.”

At this, many in the room were visibly confused about the suggestion that siding with industry is a difficult and courageous thing to do. Another commissioner said as much. A third commissioner spoke up, saying that he was not especially convinced with the evidence in the record. He noted that applicants and interveners both had presented dramatically different models, different because they had used different assumptions. He asked for an independent consultant to evaluate the information.

At least an hour of discussion and another break later, the applicants were willing to accept further studies, since it had become clear that without further clarification the application would be rejected. And so, in a room filled with palpable tension, the eager citizens waiting to hear the decision were served by the PUC with a cliff-hanger almost as suspenseful as an episode of 24… and not in a good way.

Unconvinced that BSII was needed, they elected to perform further studies at the mighty ratepayer’s expense rather than rule that the plant was not needed.

*******************************************************************

For a more factual (though decidedly less colorful) account of the Big Stone II project, check out the following resources:

http://wcco.com/local/big.stone.energy.2.740764.html

From the Sierra Club: http://northstar.sierraclub.org/campaigns/air/coal/bigStoneFactsheet.html

From the project planners (I’m an equal opportunity blogger): http://www.bigstoneii.com/PlantProject/PlantEnvironmentalImpact.asp

(Necessary caveat: a ‘more efficient’ coal plant still emits boatloads of CO2. So, sure, if you’re into that kind of thing.)

 

Senatorial Shenanigans

So it seems like the big deal these days, asides from the end(ish…) of the brouhaha that was the 2008 Democratic primary, is the Lieberman-Warner legislation (LW, as I affectionately refer to it). This bill calls for a cap-and-trade system, and the details have economic conservatives and environmentalists alike worked into a lather (incidentally, no one really anticipates that this bill will pass, but let’s not miss an opportunity to get worked up).

It’s my instinct that when extremists on both sides hate something, it’s on the right track. LW isn’t perfect, but the idea of a cap-and-trade system does have some serious street cred. It combines the merits of markets (Bill O’Reilly says: “Yea! I LOVE markets!”) with personal responsibility (don’t worry liberals, there’s something coming for you too) with, wait for it, helping the environment and revitalizing the economy.

Maybe that sounds a little pie in the sky to you (mmm… pie…), but hear me out. The problem with the current system is that technically, both everyone and no one own the sky. Industry argues that a certain amount of pollution is unavoidable, which may well be true, but there is also no cost to them to pollute lots in order to make more money. After all, their competitors are doing it too. Industry isn’t a bogeyman, it’s just that the incentives are all wrong, which is also why the market isn’t going to fix global warming on its own. Cap-and-trade systems alter these incentives by placing a monetary value on pollution. Put another way: make polluters pay for pollution and then the market will spur development of cleaner, cheaper technology.

But Diana, if the polluters have to pay for pollution, won’t they just pass those costs along to their customers?

That’s a fair point, and a legitimate concern. But the beauty of cap-and-trade systems, especially the type illustrated by Peter Barnes is that the money raised by auctioning off permits can be returned to consumers. In this way, people will be able to keep up with rising energy costs, and will also have capital to invest in weatherization or other measures that will keep down their energy bills in the long term. It’s actually a quite nifty trick.

There are a number of nuances to cap-and-trade that I have yet to go into. This is partly because I don’t want to abuse the attention span of my (rapidly growing!?!) readership (not to mention the attention span of the author). Also, if I answered all of your questions now, you wouldn’t have a reason to come back and read my blog again, would you? Feel free to comment on specific areas that you think I missed or am wrong about, and I’ll address those first. Later dudes.

-Diana

 

If You Build It, They Will Come

Hey all. I’m Diana, a Massachusetts transplant in Minnes-ough-da for the summer, working as a Communications Intern for Fresh Energy.

If you’re here for my first post, it means that either I know you (Hi Mom!) or you’re really bored at work, and did a miraculous amount of clicking to find this link. No matter. This marks my first foray into the blogosphere, and also my first time in the Midwest. You all will embark upon a magical journey with me, as I learn about energy policy (and how sexy it is!). Almost as important, I’ll be learning about living in the Heartland, where we love America and beef. You’ll laugh, you’ll cry, and at the end, we’ll all learn some valuable lessons (because, of course, this is an after-school special).

But seriously folks, I’ve spent the last four days doing a crash course on everything energy policy. Firstly, it’s fascinating. Secondly, it’s wicked important (translation: very important in Boston-speak, or hella important for you Californians). And thirdly, everybody’s doing it. I say that facetiously, but I do mean it. The clean energy movement seems to have reached a critical mass, and it certainly won’t be going anywhere soon. And good thing too, because $90 fill-ups are only part of the cost that will be borne by our generation for the current energy policies. The good news is that there are solutions out there, and many of them don’t involve walking everywhere or only showering once a week (a terrible combination…). One of the best first steps for all of us to take, as I recently learned, is getting informed about these issues.

Which, incidentally, is the point of this blog. So more on all of that later. Until next time: you stay classy, Planet Earth.

-Diana