Samuel Johnson on OPEC

Samuel Johnson and then Oscar Wilde observed that second marriages are a triumph of hope over experience. That observation can also be applied to OPEC agreements to cut production.

The history of OPEC agreements on production quotas is that they haven’t lasted much longer than it took for the ink on them to dry. The reason is quite simple. As long as member nations have spare production capacity, they have a strong financial incentive to cheat. Saudi Arabia in the past has been the swing producer and its reductions in production have been offset by other members cheating and increasing theirs. As long as demand exceeds supply and some OPEC member can increase its production, that will continue to be the case.

Earlier this week, oil markets firmed up for a brief time when it was reported that OPEC had reached an agreement to reduce production from around 33.2 million barrels a day. Then reality set in and markets slipped back down.

Agreeing that production should be reduced is different from agreeing on  the size of a reduction and how it will be allocated. It is highly unlikely that Saudi Arabia will agree to a reduction as long as Iran is pushing to increase its production to at least 4 million barrels a day. The Wall Street Journal recently reported that Iran’s “ability to reach pre-sanction levels above four million barrels a day is now in question. Iran has been pumping 3.85 million barrels a day.” but IEA has reported that Iranian production had slipped back to 3.6 million barrels a day.  What Iran can do in the near term is not at all clear.

There also have been reports that with Libya and Nigeria production recovering, actual OPEC production could be 1 million barrels above the suggested range of 32.5 to 33 million barrels.

So, where will cuts come from and how will they be enforced? Those two questions have bedeviled past agreements and in the end OPEC agreements have turned out to be triumphs of hope.   In the current situation, it appears that most members are producing at or near capacity, so the ability to cheat this time may be constrained, unless Libya and Nigeria can substantially increase theirs. In addition,the proposed reduction is not large–2% at most–, so it is unclear how much impact it would have on price?  In reality, the impact is likely to be small at best.

What is different today is US production, enhanced by “fracking” and horizontal drilling. Shale oil producers have been able to withstand the price reduction better than had been estimated, so any reduction by OPEC will be offset by increased domestic production.

This time hope will triumph and the US economy benefits if it is.

Letting Markets Work

On September 12, Colonial Pipeline, which supplies gasoline and other petroleum products from Texas to New York, was shut down because of a leak. The leaking line supplies about 1.4 million barrels/ day to states from Tennessee to New Jersey.

The shutdown had a noticeable impact on gasoline supplies from Georgia to Virginia with spot outages reported in some states. The governors of those states were quick to make state of emergency declarations, which had the primary effect being to relax constraints on hours of work by tank truck drivers and restrictions on tanker truck size. The Governors also made obligatory political statements about not tolerating price gouging, an ill-defined concept.

The media as expected focused on price increases and stations that ran short of gasoline without giving much coverage to alternative sources of supply that minimized the disruption caused by the shutdown.

Suppliers of gasoline reacted by moving more gasoline by waterborne tankers to ports along the east coast and then using tanker trucks to resupply affected areas. Colonial also began to utilize a second pipeline that typically moved distillate fuel. Gasoline suppliers had a strong incentive to reallocate supplies from other areas to minimize shortages because of they were losing sales revenue from the pipeline shutdown.

Anytime there is a shortage of any product, its price increases. That is how supply and demand works. Price increases do two things. First, they bring demand in line with available supplies and second they create an incentive to increase. For those two reasons, railing against prospective “price gouging” is not in the consumers’ best interest.

The history of price and allocation controls in the 1970s demonstrates that when government attempts to manage markets, it makes problems worse and they last longer. Then drivers had to search for stations that had supplies, often relying on word of mouth or media reports. Today, information technology and a 24 hour news cycle allows motorists to quickly find stations and areas with available supplies.

Governors apparently had learned the lesson of the 70s and avoided the “do something” overreaction while letting markets work. The lesson for the future is that the best course of action for officials and the media is to inform the public with complete and accurate facts, the actions being taken to mitigate adverse impacts, avoiding political rhetoric, and giving market forces a chance to work.

 

 

 

 

 

Yogi Berra’s Carbon Tax Advice

Yogi Berra once observed, “In theory there is no difference between theory and practice. In practice there is”. Academic analyses often ignore this wisdom because of oversimplified assumptions and a failure to adequately address real world complexity. Such is the case with an article in the September 14 Wall Street Journal—The Coming Price on Carbon by Amy Meyers Jaffe ( University of California, Davis).

The crux of her argument is that the complexity of increasing regulations aimed at carbon is leading companies to move toward a carbon tax because business places a high value on transparency and predictability. If the choice, ignoring for a moment the scientific issue, was a carbon tax or a series of regulations, the answer is straightforward. But, anyone who thinks that by embracing a carbon tax will save them from more regulation is related to Rip Van Winkle.

The Obama Administration and its environmental allies have been pursuing a strategy of increasing complex carbon related regulations as a way to get companies to beg for a carbon tax. Ms. Jaffe might be right that we are at a tipping point on this issue. If so, business might lobby aggressively for a carbon tax, get it and still be saddled with more regulations. The Obama Administration and environmental zealots have been waging a war on fossil fuels and business conceding a carbon tax will just embolden them more. They will only be satisfied when fossil energy is like whale oil, a thing of the past.

Contrary to the assertion in Ms. Jaffe’s article that “some sort of carbon price is needed because emissions have costs” there has been a de-facto price on carbon since the first Clean Air Act in 1970. Constraints on pollution related emissions have imposed costs on fossil fuels. As regulations became more stringent, environmentalists hoped or believed that coal, oil, and gas would be priced out of the market. They seem to have won on coal, but not in other countries. Petroleum based fuels have withstood the regulatory onslaught because oil is abundant, versatile, has high energy density, and is cost-effective relative to alternatives, in spite of their generous subsidies. A carbon tax would add to the cost currently being borne by carbon fuels, not reduce or replace any of them. And, that is the Achilles heal in carbon tax logic. There is no trade-off to be realized.

The case for putting a price on carbon is also based on the assertion that “technological advances have made it cheaper to move away from carbon emitting technologies. While it is true that the cost of producing solar cells and lithium ion batteries has been declining, it is not true that wind, solar, or electric vehicles are cost competitive with fossil energy. The apparent competiveness is based on tax credits and subsidies. Take away the subsidies and government bestowed incentives and the demand for alternatives would dry up. It is also misleading to imply that these alternatives are replacements for carbon. What happens when the wind doesn’t blow and the sun doesn’t shine? Coal or natural gas powered electricity. Germany, which is a leader in promoting alternatives to fossil fuels, has an electricity price about 3 times greater than the US average and has been turning back to coal to compensate for the lack of storage technology and periods when the sun doesn’t shine.

As documented in the George C. Marshall Institute report, A Skeptical Look at the Carbon Tax, a carbon tax, like Clinton’s BTU tax, faces a host of practical problems. The support that Ms. Jaffe sees comes from a coalition of “Bootleggers-and-Baptists” comprised of environmentalists, corporate rent seekers, and government dependents “who will be actively involved in designing its provisions in ways that benefit special interests, undercut any beneficial effects and accentuate its harmful side effects”. And, judging from past experience, a carbon tax will not substitute for other taxes or improve their efficiency, nor will it be implemented without political favoritism. It will be complex and become the equivalent of an ATM for Congress to increase spending.

Ms. Jaffe’s article is based on the assumption that human activities are the dominant cause of climate change. The theory of human induced climate change has not been demonstrated by scientific validation. It is a creation of climate models that have been constructed to create a self-fulfilling prophecy, which they do. The pattern of climate change over human history and the last 100 years is inconsistent with the assertion that increasing CO2 has lead to increasing temperatures since the end of the Little Ice Age. The recent pause/hiatus in warming is also inconsistent with climate orthodoxy. While advocates who claim that the science is settled use the IPCC science assessments as their foundation, they conveniently ignore the list of major uncertainties cited by the IPCC and its gradual reduction in estimated climate sensitivity.

Business and environmentalists may eventually get their desired carbon tax and if they do they will discover that Yogi Berra was right—in the real world there is indeed a difference between theory and practice. They will have been willingly snookered.

 

 

 

 

 

The Vanishing Conspiracy That Never Was

New York’s Attorney General has announced that he is abandoning his investigation that claimed ExxonMobil and other oil companies engaged in a public deception about the risks of climate change just as tobacco companies did in misleading the public about the danger of smoking. The Attorney General’s investigation, which was joined by a number of his fellow AGs, Senator Whitehouse, and Al Gore has so to speak gone up in smoke. There simply was no there there.

Given the extent of uncertainty documented by the Intergovernmental Panel on Climate Change (IPCC), the advocates’ gold standard, and the National Academies of Science (NAS), it would be virtually impossible to make a case of deliberate deception. The IPCC continues to list major uncertainties in knowledge about forces affecting warming and it has gradually reduced its estimate of climate sensitivity. The NAS was quite explicit in a report on key questions about climate change in stating that estimates of future warming were subject to revision, up or down, based on new knowledge.

The combined efforts of this group of attorney generals, some members of congress, and environmental zealots were never about what oil companies knew, when they knew it, or the funding of think tanks and others to create public confusion. From start to finish, their goal was intimidation and silencing dissent. For them, turning the First Amendment on its head was a small price to chill debate that would expose the climate orthodoxy as a Trojan Horse. Now in a face saving move, the New York Attorney General is trying a new tactic. He wants to determine whether ExxonMobil’s forecasts of the value of its reserves are misleading by not including the “full impact of climate change.”

So, it is no longer what ExxonMobil and others knew but how clear are their crystal balls. In the case of ExxonMobil, it has made disclosures to investors and publicly stated that it assumes a price on carbon in evaluating the viability of capital investment projects. The world’s appetite for energy is growing and every independent analysis concludes that fossil fuels will continue to provide 80% of that energy for decades to come. Since these estimates are made taking into account policies to reduce greenhouse emissions, they acknowledge that there is no cost competitive alternatives to oil and gas on the horizon. Assumptions about value reflect this reality.

Could there be a black swan in energy technology that renders oil and gas less valuable? Perhaps but it is not likely in the foreseeable future.

The current investigatory scheme will prove to be just as much of a boondoggle as the one that preceded it. Eventually the truth about CO2 and the complexity of the climate system will make it evident that man’s impact on the climate system is not creating an apocalypse. None the less, environmental history over the past 40 plus years demonstrates that zealots will not abandon their pursuit of power, environmental purity, and efforts to constrain market forces to promote greater economic well being.

 

 

 

 

Vodoo Energy and Fuel Delusions

At the democrat national convention, an energy plank was adopted that is totally detached from reality and inconsistent with the goal of helping lower income citizens.

In part, the energy plank states, “We are committed to getting 50 percent of our electricity from clean energy sources within a decade, with half a billion solar panels installed within four years and enough renewable energy to power every home in the country. We will cut energy waste … through energy efficient improvements; modernize our electric grid; and make American manufacturing the cleanest and most efficient in the world. … We will transform American transportation by reducing oil consumption through cleaner fuels, vehicle electrification increasing the fuel efficiency … .”

 Today, according to the Energy Information Administration, we get 13% of our electricity from renewables and will get 23% in 2025. What kind of magic will take the projected 23% to 50%? Even with an aggressive program of even more wasteful subsidies and even more stringent regulations, there is not realistic way to increase the amount of electricity generated by renewables by a factor of 3.8 in a decade. The economic impact of shuttering coal and gas fired power on such an accelerated pace would easily exceed $366 billion between 2017 and 2031, the estimated cost of the Clean Power Plant rule according to the nationally recognized firm NERA.

There are over 7600 operational power plants in the US according to EIA. It is beyond wishful thinking to assume that a large fraction could be replaced in the next nine years. Permitting is often extended because of citizen and environmentalist opposition and once permits are granted, construction can take 1-2 years. In addition, capital constraints further limit how many plants a utility can finance simultaneously.

Renewables serve a niche market—areas with lots of sun and wind. There is currently no viable storage technology for excess power that is generated by renewables. Germany’s experience in forcing renewables into the market should be cautionary lesson for democrat dreamers. The cost of electricity in Germany is about 3 times higher than the average cost in the US and Germany has to rely on coal fired power for nighttime power generation, undercutting its drive to reduce CO2 emissions.

A report by the Institute for Energy Research concluded, “The high use of renewable energy in eastern Germany driven by government green energy policies is causing instability to its own electric grid as well as to neighboring countries, … Electricity bills are also expected to go up by 10 percent this year. With residential electricity prices in Germany already about 3 times higher than prices in the United States and increasing…”

 The bottom line on renewables and electricity in the democrat platform in the words of Vice President Biden, is malarkey.

The platform also promises “We will transform American transportation by reducing oil consumption through cleaner fuels, vehicle electrification increasing the fuel efficiency of cars … “. The Obama Administration has already almost doubled the CAFÉ standard for light duty vehicles, raising it from 27.5 mpg to 54.5 mpg by 2025. The incremental cost has been estimated to range from $3000 to $6000 per vehicle, which excludes the cost of subsidies for hybrids and electric vehicles. Unless the price of gasoline rises steeply, some estimate to the $4 dollar range, the fleet average will fall short of 54.5 because consumers prefer larger vehicles than the government preferred smaller ones that have higher mileage. The increased purchase price keeps older vehicles on the road longer and penalizes lower income purchasers.

The story is the same with fuels. The government continues to push ethanol even though it is not necessary, is more expensive, and can damage fuel systems. Although the government has been excessively optimistic about the technology to produce cellulosic ethanol, it is not commercially viable. As a result, corn remains the dominant feedstock for ethanol. As such, it diverts corn from food to fuel, raising the price of a range of food products.

As a nation, we need more factual statements about energy and less rhetoric since energy is and will remain a critical input to our economic well being. Politicians should learn that setting objectives is their job, achieving them is the market’s

 

 

Never the Twain Shall Meet

The debate between climate skeptics and those who subscribe to the climate orthodoxy that human activities are creating a climate apocalypse because of consumption of fossil fuels has been on going for close to three decades and shows no signs of abating. On a range of topics, debates among reasonable people lead to greater understanding and common ground.

That has not happened in the climate debate even though empirical evidence in the form of the climate’s behavior has rebutted a number of the advocate’s claims. Temperature increases essentially halted after 1998. Extreme weather events, like hurricanes, have not increased. And, sea level rise has not accelerated. Why is it that contrary evidence has not led to advocates moderating their position?

Psychologists and some communication experts have done research on why some people refuse to accept evidence that is contrary to their beliefs. They label this phenomena “confirmation bias”. Climate advocates want to believe that human activities that produce CO2 emissions are the primary cause of global warming or climate change. The climate orthodoxy leaves little room for reflection or reassessment.

Researchers have concluded that when someone wants a concept to be true, they often stop searching for information that would refute their belief. Shaman Heshmat, a professor emeritus at the University of Illinois, has written, Confirmation bias suggests that we don’t perceive circumstances objectively. We pick out those bits of data that make us feel good because they confirm our prejudices. Thus, we may become prisoners of our assumptions”. This is characteristic of environmental zealotry.

More recent research on confirmation bias demonstrates the difficulty of getting some people to accept corrective information and facts. Attempts to counter confirmation bias often backfires and actually strengthen the biases. This is confirmed in a research paper, When Corrections Fail: The Persistence of Political Misperceptions, by Nyham and Reifer. Based on their experiments, they conclude that “corrective information in news reports may fail to reduce misperceptions and can sometimes increase them for the ideological group most likely to hold those misperceptions” and “responses to corrections about controversial political issues vary systematically by ideology”.

A related article in the Harvard Business Review, Why Debunking Myths About Vaccines Hasn’t Convinced Dubious Parents by Christopher Graves, a communication expert, reinforces the conclusions of Nyham and Reifer about why it is so hard to change strongly held views. Graves concludes that arguing facts makes a situation worse for some who will only accept evidence that is consistent with their beliefs. He also believes that people who hold incorrect views will be more likely to change their minds through a process that does not challenge them and that makes it easy to replace their incorrect narrative with an alternative one. In the case of climate advocates, that would require an epiphany by some who subscribe to the climate orthodoxy.

The research on confirmation bias makes it clear that common ground on that the climate change is to illusive and the debate will continue for some time to come. The continued accumulation of evidence that CO2 emissions are not THE primary cause of climate change may be necessary but it won’t be sufficient.   Since the Club of Rome and Limits to Growth movement, environmental elites have moved from one catastrophe to another. In time some other narrative is likely to come along to replace climate change but that will not change the deeply held belief that human activities are threatening life on earth. Climate change proves that dread is wealth generating.

Magicians and Climate Modelers

Magicians possess skills that make us want to believe that their illusions—pulling a rabbit out of hat, making someone disappear, or sawing them in half—are real. Climate modelers possess similar talents. They build elaborate and complex computer models that are used to forecast what the climate will be like decades in the future. The forecast is always gloomy and they and the climate establishment want us to believe that the forecasts are accurate..

Over the past 28 years, these models have been used to tell us that the globe’s temperature would increase more than 6 degrees C, that coastal areas and cities like New York and Washington DC would be underwater, and that there would be increases in extreme weather events like hurricanes. These forecasts have been consistently wrong and yet policy makers, the media, and climate advocates continue to push a message of doom because their real agenda is to increase central political power and to wage war on carbon.

This may seem like a harsh indictment but environmental zealots have been using computer model wizardry since the time of the Club of Rome, which also predicted doom–famine, the exhaustion of natural resources, and population growth that would outstrip the world’s capacity to sustain it. The forecasts of dread are wrong for at least three simple reasons—advances in technology, complexity that defies the ability to capture it in a model, and the “fatal conceit” of those who believe that they are smart enough to reduce a complex world to a mathematical model and develop policies for how the world should work and how we should live our lives.

The climate system is one of the most complex systems being studied. It is comprised of the atmosphere, oceans, ice, and land surface. Each of these components is comprised of complex, interconnected parts and workings that are not fully understood. Lack of understanding about these components and how they interact make it impossible to write the thousands of equations that are needed to construct an accurate climate model.

The International Panel on Climate Change in its most recent report lists 11 factors that contribute to warming—CO2, other greenhouse gases, aerosols, ozone, clouds, land use, water vapor, and solar effects. It then ranks the understanding of them from Very High to low. Of the 11, only 5, or 45%, are ranked as high or very high. Translating the uncertainty associated with these processes and other variables into the probability that models accurately represent how the climate system operates would show that it is quite small. For example, if a model contained just the 11 factors listed by the and the probability of each being correct was .75, which is a generous assumption, the probability of the model output being correct would be 0.04223513603210449. But, models have many more than 11 variables, which means that the probability that its output is correct is close to zero.

As demonstrated by Professor Ed Lorenz of MIT and the father of chaos theory, the climate system is chaotic—being non-linear where small changes can have large effects. Sensitivity to initial conditions, according to MIT’s Technology Review “has a profound corollary: forecasting the future can be nearly impossible.” Lorenz in his work reached the following conclusion, “In view of the inevitable inaccuracy and incompleteness of weather observations, precise very-long-range forecasting would seem to be nonexistent.”

There is only one reason why the climate establishment uses models as its foundation. To create illusions like magicians, so that their policy prescriptions and limits on fossil fuels appear justified to avoid catastrophe.

 

 

Bankrupt Advocacy

The Partnership for Responsible Growth, which should be renamed the Partnership for No Growth, in one of its latest Wall Street Journal ads asserts that “The Pentagon Sees Climate Change As A Serious National Security Threat”. It then asks, “Shouldn’t You”?

The answer to that question is NO!

The Pentagon has a long history of using some public concerns as a way to protect its budget and justify larger ones. In the 1960s, for example, in the midst of the Cold War, there was an annual spike in reports of Russian submarine sightings off the east coast around the time that Congress was considering the Navy’s budget. DOD embracing the so called climate threat is simply a case of emulating the logic of the infamous bank robber of the 1930s and 40s, Willie Sutton. When asked why he robbed banks, Sutton answered, “That’s where the money is”. Today, the money in this Administration is related to climate change.

Since President Obama has made climate change one of his top priorities—climate change expenditures have grown from $7.4 billion to over $21 billion–it is no surprise that DOD would latch on to it as a rationale to protect its budget, which has not fared well in recent years.

DOD’s case as cited by the Partnership has been independently reviewed a number of times and found wanting. Last year, the George C. Marshall Institute issued a report Connecting Climate and National Security that concluded:

The evidence in support of the claim that climate change will undermine U.S. national security is, at best, ambiguous and, most probably, non-existent. Dire scenarios of refugees crossing borders because of floods or civil war erupting out of famine-induced crises make for stimulating discussion, but assessments of the underlying propositions prove the scenarios unfounded. … Actual experience suggests none of the intervening conditions (droughts, floods, storms, famine, or refugees) contribute significantly to intrastate or international conflict. Indeed, some scholarship even shows that rather than creating conflict, environmental issues result in cooperation among groups and states as they work to adapt to water shortages or famine”.

The fact that this group has latched onto such a shallow and discredited argument reveals just how weak its case is. Two of its arguments are that the current Syrian refugee crisis and sea level rise around Norfolk Virginia are the result of climate change. Even the EU climate advocates haven’t gone so far as to claim that its refugee crisis is caused by climate change instead of ISIS and civil war. For the Partnership to do so trivializes a humanitarian crisis.

At least the Partnership is grossly right in its statement about sea level rise off Norfolk’s coast. Unfortunately, it is dead wrong on implied causality.

There are two reasons why Norfolk faces a long-term sea level rise problem. About 35 million years ago, a large meteor hit the mouth of the Chesapeake Bay creating a crater that is 56 miles in diameter and 1000-4000 feet deep. That has been causing subsidence, which continues. In addition, sea level around the globe has been rising since the end of the last ice age, about 16,000 years ago. According to Carl Wunsch of MIT and one of the world’s leading oceanographers, sea level will continue to rise until the next ice age.

The Partnership ad ends by attacking fossil fuels, which will be with us for decades to come in spite of its agenda, and asking “how else do we combat climate change?

It could begin by accurately defining of the climate change issue. As more scientific evidence accumulates, it becomes ever more clear that the climate system is more complex than generally appreciated, that a number of forces cause it, and that CO2 is not the major cause. As long as groups like the Partnership inaccurately define the problem, they will continue to pursue false but costly solutions. Climate has always changed and always will. The challenges that it creates can best be addressed by technology, sensible land use policies, and honesty about what we know and don’t know.

 

 

 

 

 

 

Torturing the Data and the Facts

To paraphrase Ronald Reagan, there they go again. The so-called Partnership for Responsible Growth is running a series of ads in the Wall Street Journal that attempt to make the case that human activities like heating, cooling, and lighting our homes and factories and reaping the rewards of mobility are causing climate change, which it asserts will cause an environmental disaster. It provides citations for each of its comments to lend an air of credibility but they are more like the drunk who use the lamppost for support and not illumination.

In one recent ad, it makes the following assertions:

 

  • “Sixteen of the last eighteen years were the hottest on record and 2015 was confirmed as the hottest ever by far. Despite what you may have heard, there has been no “pause.”

 

  • “And not surprisingly, CO2 levels and temperatures track together in the geologic record”.

In spite of the use of citations, these statements are a manifestation of Darrell Huff’s How to Lie With Statistics. The first statement is technically correct but misleading, while the second statement is just wrong.

Since the 1998 high of 54.9 degrees, there have only been two years that exceeded that le3vel according to NOAA—2010 and 2012. The other years have ranged between 52.4 and 54.8 degrees. The data, government data, clearly show a pause. Annual temperatures in the 54 degree range are not unusual. They occurred in 1931, 1934, 1938, 1939, and 1953.

When advocates cite specific years as being the hottest or one of the hottest, they are relying on changes of tenths of a degree but implying much larger changes. The exceptions were 2010 and 2012, which were the hottest since the end of the Little Ice Age. Further, the averages reflect adjustments to correct for the heat island effect, changes in measurement devices, and locational factors. Mercury thermometers, which have been used in the past and record temperatures twice daily, are being replaced with electric devices called thermistors, which provide continuous readings. And, there is evidence that thermisters, which are more accurate, read warmer than the devices they replaced. So, the adjustments and change in devices introduce confounding variables that should produce interpretative caution, not bold pronouncements.

About all that can be concluded with confidence is that it has warmed since the late the end of the Little Ice Age and temperatures have shown a cyclical pattern since that time. From 1805 until the late 1930s, temperatures increased. From 1940 until the mid 1980s, they declined and then started increasing until the end of the 1990s. Since then, there has been no significant increases. The patterns observed over the past century are not consistent with the assertion that increasing atmospheric concentrations of CO2 are causing dangerous warming and climate change.

The statement that CO2 levels and temperatures “track together in the geologic record” is not even grossly right; it is precisely wrong. A report by the CO2 Coalition, Carbon Dioxide Benefits the World: See for Yourself, contains a figure, CO2 Levels on Earth, that shows CO2 levels 600 million years in the past.   The following figure clearly shows that over the course of geologic history, CO2 have been declining, while temperatures have increased and decreased.

global-temp-co2-over-geological-time1

Al Gore’s book Earth in the Balance contains a graph that was contructed to show almost constant levels of CO2 and temperatures until the recent past when they appear to go almost straight up. Of course, Gore’s graph was constructed to bolster his message; not to provide accurate information. When his data were plotted in a non-biased way, they reveal that there have been periods when CO2 has risen but not temperatures, when temperatures rose but not CO2, periods when temperatures have risen in tandem with CO2, periods when temperature declined and CO2 levels rose, and periods where temperatures rose but CO2 levels remained constant or declined.

There is a saying in analysis that clearly applies to the Partnership’s advertising campaign: torture the data until it confesses; torture it too much and it will confess to anything.

The Big Ethanol Scam

Annually over the past several years, Congress has considered the repeal of the Renewable Fuels Standard (RFS) and each time has blinked because of the ethanol lobby. Consideration of repeal is before Congress again but in an election year it is likely to happen as seeing pigs fly.

The Renewable Fuels Association leaves nothing to chance and is once again making an all out push to convince consumers, thought leaders and others that the RFS is in the nation’s best interest. What it really is, is just another example of Baptist and Bootlegger economics, an alliance that allows an economic interest—corn farmers and ethanol producers—to enrich themselves by claiming to pursue a cleaner environment and bolster national security.

The facts are completely different than the image being sold by the ethanol lobby. It has been known for almost 30 years that lower tailpipe standards could be met without the oxygenate mandate in the 1990 Clean Air Act amendments. In spite of self serving rhetoric, the ethanol mandate does nothing for the environment, nothing for national security, and instead wastes a valuable food source, damages engines, and robs consumers. Before the Clean Air Act was amended in 1990, the Oil and Auto industries presented Congress with the results of the largest and most expensive research program on fuel-vehicles interactions ever conducted. It demonstrated that the lower tailpipe emissions being contemplated could be achieved without an oxygenate—ethanol—mandate. Congress ignored those results because it needed the support of the farm lobby for passage. In addition to writing a formula for gasoline into law, Congress provided a generous tax credit to offset the higher cost of complying with the mandate.

The Renewable Fuels Association makes the incredulous claim that the ethanol industry “doesn’t receive any federal government subsidies and that it is not a program which the government pays companies to convert corn into ethanol alcohol into an additive.” While these two statements are technically correct, they are misleading and disingenuous. Congress did repeal the ethanol federal tax credit in 2011 but in 2007 imposed a volumetric mandate that increases over time. Forcing refiners to use an additive that they don’t want or need, forces them to purchase ethanol from manufacturers and rewards farmers for planting more corn than consumers demand. A subsidy does not have to be a direct government payment. The existence of the mandate represents “financial assistance provided by a government to another entity, usually a business or industry,” which is a definition of subsidy. The cost to consumers has been calculated to be about $10 billion annually

Were it not for the mandate, the ethanol industry would be a lot smaller and so would be the corn crop, 40% smaller. The mandate has driven up the price of corn and the cost of foods made from corn and foods where corn is a feed for animals. The higher cost of these foods is a tax that is especially punitive to those on low and fixed income and devastating to the global poor who subsist on less than $2 a day.

Ethanol proponents claim that ethanol increases national security because it reduces the amount of oil imports from unstable regions of the world. At first blush, the claim appears to make sense since ethanol is substituted for an equal quantity of gasoline. However, ethanol is less energy efficient than gasoline, so more gasoline has to be consumed to travel the same distance as can be traveled with ethanol free gasoline. An analysis in 2009 by the Energy Insider newsletter reached this conclusion, “The easiest conclusion is that the claims of petroleum import displacement have been at a minimum grossly exaggerated. It may even be that ethanol hasn’t backed any petroleum imports out, or that the impact is so small as to be unnoticeable.” Oil imports have been declining since 2008 but that is a result of fracking, not ethanol. Further, our major sources of oil imports isn’t the Persian Gulf, it is Canada and Mexico.

The dominance of special interest influence is Washington is fueling the anger so visible in the electorate. Congress and the next Administration can take a corrective step by repealing the Renewable Fuel Standard and letting the market determine the composition of the fuel that powers our trucks and cars.