Emissions Down in 2008: Take Note of Why

The U.S. Energy Information Administration recently reported that CO2 emissions fell in 2008. That, of course, should make all those fretting about so-called manmade global warming quite happy.

However, the causes for this drop off should concern the rest of us.

The EIA reported:

Factors that contributed to the decline include:

• Energy prices

- In 2008, gasoline and diesel prices were at their all-time peak level
- Near the end of the year, despite lower energy prices, gasoline and diesel demand was dampened by a drop in consumer income

• Lower economic growth


- In 2008, GDP growth was a modest 1.1 percent

- In the 4th quarter, GDP fell at an annual rate of 6.3 percent

• Total energy consumption in 2008 fell by 2.2 percent

That provides valuable information about how CO2 emissions reductions sought by Congress and the White House will be achieved, that is, through higher energy costs and a declining economy.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

CEOs, the UN and Emissions

The May 26 Wall Street Journal ran one of those news articles that tells the world – in this case, the business world – to give up. Specifically, emissions caps are coming in the name of fighting so-called manmade global warming, so either get on board or be left behind.

Naturally, some business executives are more than willing to get onboard for various reasons, ranging from fear to politics to foiling current and/or future competitors to calculation they can make some money off of government dictates.

The Journal article declared:

Chiefs of some of the world's largest companies are urging global leaders to cut a strong deal this December to curb pollution, saying they need certainty on emissions targets to be able to make long-term investment decisions.

The World Business Summit on Climate Change, which brought together more than 500 business leaders, is being seen as a crucial milestone on the road to December's meeting here, at which governments will try to hammer out a successor agreement to the United Nations' Kyoto Protocol. Many of them said a global deal would provide the regulatory certainty and price signals they need to invest in renewable fuels and low-carbon technologies…

In a speech to the summit Sunday, U.N. Secretary General Ban Ki-Moon said that only a few businesses had made climate change a priority, with most sitting on the fence and others defending "the old order." "For those who are directly or implicitly lobbying against climate action, I have a clear message: Your ideas are out-of-date and you are running out of time," he told delegates.

Well, there you have it. Business advice from the United Nations. And of course, the declaration on the need for certainty in order to invest.

In reality, though, given the enormous costs that would come along with government-mandated reductions in CO2 emissions, most businesses would be insane to get onboard. The only thing certain in the entire global warming policy debate is that government dictates on reducing emissions will dramatically jack up energy costs, reduce economic output and incomes, and cripple or destroy entire businesses and industries.

U.N Secretary General Ban Ki-Moon has it backwards. The out-of-date old order are those who still believe that government can intervene in the marketplace and the economy without negative consequences. Indeed, many in this old order actually believe government functions better than private sector ownership and competition to serve consumers. It is this old order that threatens our economy, and businesses should be at the forefront of challenging it.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Obama, McCain and Coal

So, on Sunday night, it came to light that the San Francisco Chronicle had tapes of a January interview with Senator Barack Obama in which Obama basically said that electricity coming from coal was going to be a heck of a lot more expensive under his proposed cap-and-trade regulatory scheme meant to reduce CO2 emissions.

There is an interesting piece on the topic by Max Schulz at National Review Online titled “Coal in Your Stocking.” Schulz spells out the costs, and speculates about what might have happened in the presidential campaign if Obama’s statements had been released earlier.

Schulz noted:

In the January editorial-board meeting, Obama made two stunning comments about the costs of his cap-and-trade proposal to curb greenhouse gas emissions. First, he said, “If somebody wants to build a coal plant, they can — it’s just that it will bankrupt them, because they are going to be charged a huge sum for all that greenhouse gas that’s being emitted.” He mentioned that existing coal plants will have to retrofit their operations. “That will cost money,” Obama said. “They will pass that money on to consumers.” He followed that up with an even more damning pronouncement: “Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.”

And later, he wrote:

The reality is a lot closer to what Obama revealed in San Francisco. Costs for consumers will skyrocket. Coal is one of the cheapest sources of baseload power, cheaper than renewable technologies like wind and solar by orders of magnitude. Plus, it can provide reliable supplies, while power from windmills and solar panels is intermittent. Obama promises that his cap-and-trade plan would shut down the industry that provides half the nation’s electricity.

Shulz concluded:

The revelation of those comments Sunday night has given John McCain and Sarah Palin a small window of time to capitalize. They are trying these last two days to impress on voters that an Obama-Biden victory would mean bad news for coal-producing states like Ohio, Pennsylvania, and Virginia. More than that, however, an Obama win would be bad news for coal-consuming states, i.e., those that get a huge share of their electricity from coal or that house energy-intensive industries. And that’s most of the country. Skyrocketing energy costs won’t just hurt coal miners. They’ll hurt everybody.

Schulz gets the policy and cost analysis exactly right. The problem with his assessment of McCain’s response to this is that McCain has been leading the charge for these same exact policies. There is no difference between Obama and McCain on the issue. Both favor a cap-and-trade regulatory system that will drive electricity costs higher. Obama, amazingly, acknowledged the terrible costs cap-and-trade regulation will impose. McCain has long pushed the same agenda; he just doesn’t acknowledge the costs.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

EPA Moves to Control the Economy

The Environmental Protection Agency (EPA) released an “advanced notice of proposed rulemaking” (ANPR) on July 11, which basically outlines their general framework for how the agency proposes to regulate greenhouse gas emissions under the Clean Air Act (CAA). Essentially, the EPA’s approach would regulate almost anything that moves and produces. Even some homes could fall under permitting requirements for energy use. This is not a joke.

So if your home and lawn mowing habits (Yes, “grass mileage standards”…I am not kidding) are highly regulated from Washington, what about small businesses?

Yes, you guessed it. New rules, costs, permits, modifications, technology requirements, paperwork, etc., etc. (and there will be fines of course!). The regulatory concepts outlined in the EPA’s approach represent an enormous and unprecedented economic blow to small businesses -- that is, if they were enacted. It is clear that rogue bureaucrats at the EPA designed this initiative, and Congress needs to step in.

Recently, the U.S. Senate overwhelmingly rejected a costly and complex scheme to regulate CO2. The EPA’s approach to regulating greenhouse gas emissions is much, much worse.

It appears Congress has fine-tuned its investigatory skills over the past year and a half (with the private sector being its main target), so perhaps they can spend some time conducting oversight of the federal government agencies right under their noses. Congress needs to learn how this massive and complex regulatory scheme will work, and how the EPA developed its approaches and models for moving forward with this specific ANPR.

Small businesses and the public can make their voices heard on this debate as well. You will have 120 days to comment on the ANPR. You have not heard the end of this issue – more to come!