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Energy

Why Bad Climate Legislation Is Worse Than No Climate Legislation

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From Michael Schellenberger

Moderate Democratic Senators Joe Manchin & Krysten Sinema Are Right to Oppose the Clean Energy Performance Program

Progressives are angry that moderate Democratic Senator Joe Machin has reportedly opposed the inclusion of climate-related legislation in President Joe Biden’s budget “This is absolutely the most important climate policy in the package,” said Leah Stokes, a Canadian political scientist who helped write the legislation. “We fundamentally need it to meet our climate goals. That’s just the reality.”

But that’s not the reality. The “Clean Energy Performance Program” is not needed to meet climate goals, and might actually undermine them.

Consider Waxman-Markey. That’s the name of the “cap and trade” climate legislation that passed the House but failed in the Senate in 2010. It had a climate goal of reducing U.S. greenhouse gas emissions by 17 percent below 2005 levels by the year 2020. Instead, the U.S. reduced its emissions by 22 percent.

Had cap and trade legislation passed in the Senate, emissions would have declined less than 22 percent, because Waxman-Markey so heavily subsidized coal and other fossil fuels. As the Los Angeles Times reported at the time, “the Environmental Protection Agency projects that even if the emissions limits go into effect, the U.S. would use more carbon-dioxide-heavy coal in 2020 than it did in 2005.”

The same thing would likely have been true for the Clean Energy Performance Program, which lock in natural gas. Consider France. According to the Commision de Regulation de L’Energie, €29 billion (US$33) billion was used to purchase wind and solar electricity in mainland France between 2009 and 2018. But the money spent on renewables did not lead to cleaner electricity. In fact, the carbon-intensity of French electricity increased.

After years of subsidies for solar and wind, France’s 2017 emissions of 68g/CO2 per kWh was higher than any year between 2012 and 2016. The reason? Record-breaking wind and solar production did not make up for falling nuclear energy output and higher natural gas consumption. And now, the high cost of renewable electricity is showing up in French household electricity bills.

Some pro-nuclear people supported the proposed Clean Energy Performance Program. They claimed it would have saved existing nuclear plants at risk of closure. According to the U.S. Energy Information Administration, the closure of nuclear plants including Diablo Canyon in California, will result in nuclear energy in the U.S. declining by 17% by 2025. If the Program had passed, some pro-nuclear people believe, plants like Diablo Canyon could have been saved.

But the Clean Energy Performance Program would not have saved Diablo Canyon for the same reason it would not have saved Indian Point nuclear plant, which closed in New York, earlier this year: progressive Democratic politicians are forcing nuclear plants to close, and at a very high cost to ratepayers.

If the Clean Energy Performance Program had passed into law, Diablo Canyon’s owner, Pacific Gas & Electric, would simply have passed the $500 million to $1.5 billion penalty imposed by the Program onto ratepayers, along with the other billions in costs related to closing Diablo Canyon 40 years earlier than necessary. The same would have happened with Indian Point.

Where there is political support for saving nuclear plants, state legislators and governors save nuclear plants, as they did in Illinois a few weeks ago, and as they have done in Connecticut, New Jersey, and with up-state nuclear plants in New York. In other states, nuclear plants are protected from cheap natural gas by regulated electricity markets. And now, with natural gas prices rising dramatically, any nuclear plants at risk of closure for economic reasons are no longer at risk.

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What threatens the continued operation of nuclear power plants, and nuclear energy in general, is the continued subsidization of renewables, which the Clean Energy Performance Program would have put on steroids. Under the program, utilities would have received $18 for each megawatt-hour of zero-emissions energy it produces between 2023 to 2030, on top of the existing $25 per megawatt-hour subsidy for wind energy.

Under such a scenario, notes energy analyst Robert Bryce, a wind energy company “could earn $43 per megawatt-hour per year for each new megawatt-hour of wind energy it sells. That’s a staggering sum given that the wholesale price of electricity in New York last year was $33 per megawatt-hour. In Texas, the wholesale price of juice was $22 per MWh.”

Manchin is joined in his opposition to the Plan by moderate Democratic Arizona Senator, Krysten Sinema, and understandably so. The legislation would cost Arizona ratepayers nearly $120 billion in additional electricity costs, according to energy analysts Isaac Orr and Mitch Rolling of the American Experiment. “This would result in a 45 percent increase in electricity prices by 2031, compared to 2019 rates,” they note.

As troubling, the Clean Energy Performance Program would increase dependence on solar panels made in China by incarcerated Uighyr Muslims living in concentration camps and against whom the Chinese government is committing “genocide,” according to the U.S. State Department. New research shows that China made solar panels cheaper through the use of forced labor, heavy government subsidies, and some of the dirtiest coal in the world. The Program would have done nothing to shift production of solar panels back to the U.S.

Nor would the legislation have done anything to internalize the high cost of solar panel waste disposal. Most solar panels become hazardous waste, and create dust from heavy metals including lead, as soon as they are removed from rooftops. A major study published in Harvard Business Review earlier this year found that, when the high cost of managing toxic solar panel waste is eventually accounted for, the true cost of solar electricity will rise four-fold.

As troubling, the continued expansion of weather-dependent renewables will increase electricity costs and blackouts across the United States, as they did in California and Texas. Those renewables-driven blackouts were likely on Senator Manchin’s mind when he made his decision to oppose the Clean Energy Performance Plan. He certainly knows about the problems of renewables in Texas and California, since I discussed them directly with Manchin when I testified before his committee earlier this year.

A better approach would be for Congress to seek nuclear-focused legislation to expand nuclear from its current 19% of U.S. electricity to 50% by 2050. It should take as a model the British government’s announcement yesterday that it would put nuclear energy at the center of its climate plans. Global energy shortages triggered by the lack of wind in Europe have led nations to realize that any efforts to decarbonize electricity grids without creating blackouts must center nuclear power, not weather-dependent solar and wind.

Environmental Progress and I met with British lawmakers in 2019 to advocate for a greater focus on nuclear. At the time, many British energy analysts, as well as ostensibly pro-nuclear climate activists, Mark Lynas and George Monbiot, were telling the public that their nation did not need more nuclear, as Britain could simply rely more on wind energy, and natural gas. Now, electricity prices are skyrocketing and factories are closing in Britain, due to a bad year for wind.

It was a strange experience to be alone in Britain, without support from supposedly pro-nuclear Britons, in urging lawmakers to build more nuclear plants, but I was similarly alone in many other parts of the world, and got on with the task. Happily, one year later, former Extinction Rebellion spokesperson Zion Lights joined me in advocating for nuclear, and quickly forced the government to agree to a nuclear build-out.

Today, in the U.S., there is a growing grassroots movement for nuclear energy, one which saved nuclear plants, twice, in Illinois, and other states, and is gearing up to save Diablo Canyon nuclear plant in California. Doing so will require a new governor, since the current one, Gavin Newsom, made closing the plant a feature of his sales pitch to powerful environmental groups, including Sierra Club and Natural Resources Defense Fund which are, like Newsom himself, heavily funded by natural gas and renewable energy companies that stand to benefit from the Diablo’s destruction.

Leadership at the national level will need to come from Senators Manchin and Sinema. While a significant amount of electricity policy is determined by the states, the Senate can play a constructive role in maintaining the reliability, resiliency, affordability, I testified to Senator Manchin and other committee members. Senator Sinema is from Arizona, a state with the largest nuclear plant in the U.S., Palo Verde, and which is a model of how to make electricity both low in emissions, and in costs.

With the Clean Energy Performance Program now apparently dead, the Congress, led by Manchin and Sinema, should take policy action to not only keep operating the nuclear plants that have been critical to preventing power outages in recent years, but also expand them.

About Michael Shellenberger

Michael Shellenberger is a Time Magazine “Hero of the Environment,”Green Book Award winner, and the founder and president of Environmental Progress.

He is author of the best-selling new book, Apocalypse Never (Harper Collins June 30, 2020), which has received strong praise from scientists and scholars. “This may be the most important book on the environment ever written,” wrote climate scientist Tom Wigley. “Apocalypse Never is an extremely important book,” says historian Richard Rhodes, who won the Pulitzer Prize for The Making of the Atomic Bomb. “Within its lively pages, Michael Shellenberger rescues with science and lived experience a subject drowning in misunderstanding and partisanship. His message is invigorating: if you have feared for the planet’s future, take heart.”

Additional Reading:

Why Biden’s Climate Agenda Is Falling Apart

Nuclear Plant Closures And Renewables Increase Electricity Prices & Unreliability, Testifies Michael Shellenberger to U.S. Senate

China Made Solar Cheap With Coal, Subsidies, And “Slave” Labor — Not Efficiency

Why Everything They Said About Solar Was Wrong

Business

New York and Vermont Seek to Impose a Retroactive Climate Tax

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From Heartland Daily News

By Joshua Loucks for the Cato Institute.

Energy producers will be subject to retroactive taxes in New York if the state assembly passes Senate Bill S2129A, known as the “Climate Change Superfund Act.” The superfund legislation seeks to impose a retroactive tax on energy companies that have emitted greenhouse gases (GHGs) and operated within the state over the last seventy years.

If passed, the new law will impose $75 billion in repayment fees for “historical polluters,” who lawmakers assert are primarily responsible for climate change damages within the state. The state will “assign liability to and require compensation from companies commensurate with their emissions” over the last “70 years or more.” The bill would establish a standard of strict liability, stating that “companies are required to pay into the fund because the use of their products caused the pollution. No finding of wrongdoing is required.”

New York is not alone in this effort. Superfunds built on retroactive taxes on GHG emissions are becoming increasingly popular. Vermont recently enacted similar legislation, S.259 (Act 122), titled the “Climate Superfund Act,” in which the state also retroactively taxes energy producers for historic emissions. Similar bills have also been introduced in Maryland and Massachusetts.

Climate superfund legislation seems to have one purpose: to raise revenue by taxing a politically unpopular industry. Under the New York law, fossil fuel‐​producing energy companies would be taxed billions of dollars retroactively for engaging in legal and necessary behavior. For example, the seventy‐​year retroactive tax would conceivably apply to any company—going back to 1954—that used fossil fuels to generate electricity or produced fuel for New York drivers.

The typical “economic efficiency” arguments for taxing an externality go out the window with the New York and Vermont approach, for at least two reasons. First, the goal of a blackboard or textbook approach to a carbon tax is to internalize the GHG externality. To apply such a tax accurately, the government would need to calculate the social cost of carbon (SCC).

Unfortunately, estimating the SCC is methodologically complex and open to wide ranges of estimates. As a result, the SCC is theoretically very useful but practically impossible to calculate with any reasonable degree of precision.

Second, the retroactive nature of these climate superfunds undermines the very incentives a textbook tax on externalities  would promote. A carbon tax’s central feature is that it is intended to reduce externalities from current and future activity by changing incentives. However, by imposing retroactive taxes, the New York and Vermont legislation will not impact emitters’ future behavior in a way that mimics a textbook carbon tax or improves economic outcomes.

Arbitrary and retroactive taxes can, however, raise prices for consumers by increasing policy uncertainty, affecting firm profitability, and reducing investment (or causing investors to flee GHG‐​emitting industries in the state altogether). Residents in both New York and Vermont already pay over 30 percent more than the US average in residential electricity prices, and this legislation will not lower these costs to consumers.

Climate superfunds are not a serious attempt to solve environmental challenges but rather a way to raise government revenue while unfairly punishing an entire industry (one whose actions the New York legislation claims “have been unconscionable, closely reflecting the strategy of denial, deflection, and delay used by the tobacco industry”).

Fossil fuel companies enabled GHG emissions, of course, but they also empowered significant growth, mobility, and prosperity. The punitive nature of the policy is laid bare by the fact that neither New York nor Vermont used a generic SCC or an evidentiary proceeding to calculate precise damages.

Finally, establishing a standard in which “no finding of wrongdoing is required” to levy fines against historical actions that were (and still are) legally permitted sets a dangerous precedent for what governments can do, not only to businesses that have produced fossil fuels but also to individuals who have consumed them.

Cato research associate Joshua Loucks contributed to this post.

Originally published by the Cato Institute. Republished with permission under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

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Energy

Natural resources remain backbone of Canada’s trade and prosperity

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From the Fraser Institute

By Jock Finlayson and Elmira Aliakbari

It’s hard to overstate the importance of energy to our economy. In its latest “scorecard” report, the Coalition for a Better Future notes that “over the past decade, Canada recorded a cumulative trade gap of $130 billion. Had it not been for energy, our trade gap would have been about $1 trillion.” By any measure, the energy sector punches above its weight when paying Canada’s bills.

Canada is a mid-sized economy accounting for roughly 2 per cent of global production. Within North America, we represent less than one-tenth of the collective output of the three national economies. Canada is also an “open” economy that relies on cross-border flows of trade, investment and knowledge to sustain our high living standards.

To pay our way in an unforgiving and very competitive world, Canada must produce and sell exports to customers in other markets. Among other benefits, these exports furnish the financial means to pay for the vast array of imports that enhance the wellbeing of Canadian households and allow many of our businesses to operate efficiently and grow.

In 2022, Canada exported $779 billion of goods to other countries, and $161 billion of services, for a total of $940 billion. About three-quarters of Canada’s exports are destined for a single market—the United States. Canada also sources the bulk of imports from the U.S.

A hard truth about Canada’s trade is the outsized role of natural resource-based products in the export mix. Added together, energy, non-metallic minerals (and related products), metal ores, forest products and agri-food (i.e. food produced from agriculture) comprise roughly half of Canada’s international exports of goods and services—a notably larger share than in other countries with advanced economies (apart from Australia and New Zealand).

Energy alone accounted for 27 per cent of Canada’s merchandise exports in 2022, generating $212 billion for Canadian businesses, workers and governments. Mining contributed $85 billion in export revenues, followed by forest products ($60 billion) and agri-food ($57 billion).

Within the broad energy basket, oil and oil-based products dominate, accounting for more than three-quarters of all energy-based export revenues. Despite innumerable speeches and press releases issued by the federal government, energy’s contribution to Canada’s exports is poised to increase in the next few years—due not to growing exports of “clean tech” goods, carbon-free electricity or hydrogen, but to pending liquefied natural gas (LNG) production in British Columbia coupled with rising volumes of Western Canadian oil shipments following the completion of pipeline expansion projects.

It’s hard to overstate the importance of energy to our economy. In its latest “scorecard” report, the Coalition for a Better Future notes that “over the past decade, Canada recorded a cumulative trade gap of $130 billion. Had it not been for energy, our trade gap would have been about $1 trillion.” By any measure, the energy sector punches above its weight when paying Canada’s bills. The same is true, albeit to a lesser extent, for the other major resource sectors.

Many Canadians, huddled in increasingly unaffordable urban communities that have few evident connections to the country’s natural resource economy, may be puzzled by the continued vital importance of resource extraction and processing to Canada’s prosperity.

Ultimately, any trading country has a ledger showing the trade surpluses and trade deficits of its industry sectors. In Canada’s case, a handful of sectors generate significant trade surpluses, which help finance the large trade deficits incurred in other parts of the economy.

The story is a simple one—positive trade balances in the energy, mining, forestry and agri-food sectors offset chronic—and in some cases fast-growing—trade deficits in consumer goods, chemicals and plastics, motor vehicles/parts, and industrial and electronic goods. Canada also runs a smallish deficit in our overall services trade.

The sectoral trade data are informative. Among other things, they tell us where Canada has a “comparative advantage” in the global context. For a market economy, a pattern of positive trade balances is evidence that it has a comparative advantage in industries that reliably report trade surpluses.

Armed with such information, smart policymakers should create and sustain a business and investment climate that champions and bolsters the commercial success of industries that underpin the export economy. This is a message the Trudeau government has had trouble digesting, perhaps because it relies heavily on the votes of a few large metropolitan areas while most rural and resource-dependent regions remain a political afterthought.

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