Follow The Dutch

Although we enjoyed a long stretch where no major hurricane made land fall, the last few years have been different and the storms have caused a great deal of damage, including serious flooding. By contrast, It has been over 60 years since the Netherlands had any serious flooding from either hurricanes or major North Sea storms, even though the Netherlands is mostly below sea level.

The difference is that the Dutch accept the reality of storms and the flooding that they can cause and have developed an aggressive program of mitigation and adaptation. By contrast, we tend to rebuild and tinker at the margins with actions like modifying building codes, erecting barriers, managing flood plains, and the National Flood Insurance Program. Whatever the merits of these and other actions, they have not been sufficient to effectively mitigate flood and hurricane damage.

The damage from floods and hurricanes runs into the tens of billions of dollars each year. According to the National Climatic Data Center floods and hurricanes between 2010 and 2015 cost the nation $34 billion. And in the last three years the costs have run into the hundreds of billions of dollars.

The National flood insurance reimburses owners who then rebuild in the same places, ensuring future damages unless risk mitigation steps have been taken as part of the rebuilding. Looking back over the past decade, it seems clear that the Federal and state governments are in a vicious cycle working at the margins, incurring losses, and providing insurance reimbursements so that rebuilding can take place.

If the definition of insanity is doing the same things over and over and expecting a different result, then our approach to addressing hurricane and flood risks is insane. It is time to reassess our approach to dealing with hurricanes and floods and the extent to which adopting the Dutch approach, which would be expensive, would reduce future damages. The Dutch create artificial sand dunes in coastal areas, some of which are large enough to house parking garages underneath. They have constructed dikes, dams, and floodgates to protect against water surges, along with a system of drainage ditches, canals, and pumping stations. There should be a serious study of what Dutch techniques will work in which areas and then a federal-state plan to implement them.

Beyond that, the National Flood Insurance Program should be abolished. States are more than capable of designing flood insurance programs to deal with their specific risks. And, there should be no flood insurance subsidies that shelter some from bearing the full costs of risks where they build. If owners of coastal property had to take the full cost of insurance into account in making their construction decisions, there would likely be fewer houses built so close to shorelines.

There also should be another careful review of FEMA and its mission. FEMA like most bureaucracies seeks larger budgets, more people and more power. Responding to disasters will generate more of those than focusing more on prevention and mitigation. There should be a robust research program on ways to mitigate flood and hurricane damage and related engineering data that states could use to develop state specific programs. Currently, FEMA’s strategic plan has risk management and mitigation as a high priority but it is not clear what FEMA does beyond information sharing that involves forward looking engineering research and drawing on the Netherlands experience to develop best practices for states to implement. There is nothing in the FEMA budget that does that.


The Internal Combustion Engine is Alive and Well

Recent analyses forecast that oil use, primarily gasoline, will peak anywhere from the early 2020s to as late as 2040. The basis for this forecast are government actions to compel a reduction in mobile source CO2 emissions and a transition to EVs. While these forecasts may prove accurate, there are reasons to apply a reasonable dose of pessimism that EVs will lead to a reduction in gasoline powered vehicles..

Climate change alarmism is predicated on the belief that the consumption of fossil fuels and the resulting increase in CO2 emissions is causing serious climate change that will only worsen. This belief is based primarily on the results of complex computer models that have been shown time and again to overstate actual warming, and hence the effect of atmospheric CO2 levels. Since 1998, actual global temperatures have not increased in lock step with increases in CO2 levels and even the IPCC has lowered its estimate of climate sensitivity. While none of this has so far had an effect on government policies outside of the US, at some point reality will make denial and the cost of it unacceptable.

So, absent more compelling evidence on anthropogenic climate change or a significant break though in EV technology the pressures to transition from the internal combustion engine (ICE) should subside and the ICE will continue to have a bright future.

Advances in vehicle and fuel technologies will lead to further reductions in tail pipe emissions, including CO2, and to further increases in fuel efficiency and economy. Those advances include direct injection, cylinder deactivation, variable valve timing, more turbo charged engines, greater use of sensors and computers to manage engines and better aerodynamics. It is estimated by some that ICE efficiency could reach 50%.

There are about 7.5 billion people in the world with 1.1 billion in developed countries. World wide there are about 1.2 billion on road light duty vehicles—gasoline powered. Almost one-half of those are in the US and Europe. As the emerging and developing economies grow, so will the demand for mobility. That will lead to a higher penetration rate of ICE powered vehicles. If the ownership rate reaches one half the US/Europe rate in the next two decades, about 1.5 billion vehicles would be added to the global fleet.

Economic development around the globe and advances in technology explain why EIA and HIS Markit project that ICEs will still be the consumers choice in 2040.

It’s Déjà Vu All Over Again

Several analyses have recently been released concluding that the end of the oil era is at hand. A Norwegian analysis puts peak demand five years from now while BP puts the start of a decline between 2035 and 2040.

The predicted end of the oil age is based on a belief that renewables will “dominate an increasingly electrified and efficient energy system.” There seems to be a growing belief that wind and solar are increasingly cost-competitive with oil, natural gas and coal. Beliefs need to be more than wishful thinking. The manufacturing costs of solar panels and wind turbines may be declining and generous government subsidies stimulate demand but they are not enough to bring about the long anticipated energy transition. It is total systems cost that matters along with the penetration of new technology.

Perhaps by 2040 there may be break throughs in battery and storage technologies but progress has not been that great over the past two decades and government does not have a good track record in forcing technologies into the market. Although a great deal of money is being ploughed into the development of energy storage technologies, they are in the early stage of R&D and utilities will not adopt them until their reliability is proven and they are cost competitive.

Since both wind and solar are intermittent, utilities need either proven storage capabilities or reliable back up power which is most likely to be either coal or natural gas. The EU has been the most aggressive in attempting to move to renewables and away from fossil fuels, especially Germany. But recently six European nations called for continuing the use of coal fired plants beyond 2030 and Germany, which has electricity rates three times the US average has backed away from its goal of reducing CO2 levels 40% below 1990 levels by 2020. A more likely transition, absent mandates and subsidies, is not to wind and solar but natural gas which is in great abundance.

Since oil is primarily used to make transportation fuels a decline in demand would require a dramatic shift to hybrids and EVs. There are a number of reasons to be skeptical about that happening in the next decade or so. First, governments are likely to reduce or eliminate generous subsidies for alternatives as they confront growing deficits. And, without those subsidies, demand will shrink. Second, as developing nations achieve higher standards of living, there will be an increase in mobility, which will come from gasoline or diesel powered vehicles. Third, battery packs remain expensive and suffer range limitations, especially in cold and very hot climates. Fourth, trucks, airplanes and ships will continue to rely on liquid fuels. Fifth, continued advances in technology for internal combustion engines will increase their efficiency and cost-effectiveness. And finally, over the next several decades the weight of scientific evidence ought to make it even more clear that CO2 is not the primary driver of warming and climate change.

For over a century, there have been regular predictions that the oil age would end in 20 years or less. But oil continues to dominate transportation because of its abundance, energy density, and cost-effectiveness. Someday, one of these predictions about the end of the oil age will prove true but the odds do not favor that day bring in the foreseeable future.

The Gotcha Regulation

Rep Chris Collins, who also happens to be a director of Innate Immunotherapeutics, has been charged with insider trading by Federal prosecutors. From the description in the media and the process of connecting the dots from a call to his son who told others, the case that he breached his fiduciary duty appears to be strong.

However, the case against insider trading is not as clear cut as it is generally made out to be. The law as contained in the Insider Trading Act of 1988 defines penalties for insider trading for someone who is guilty of breaking SEC rules when using material, non-public information to trade securities, or when passing on information to another person who acts upon the information. But there is no is no statutory definition of insider trading and not all insider trading is illegal. As a result, the SEC can distort its definition any way it wants and there are numerous examples of it doing so in the past. Writers have documented many allegations of insider trading that were based on weak evidence.

There is a fine line between what is legitimate insider information and what isn’t. In today’s high-tech world professional traders exploit all relevant sources of information. In making judgments about whether information is legitimate or not, a major consideration is the source. Is it second or third hand, is it information that anyone can obtain by a little research and drawing inferences, or is it from a banker, lawyer, or corporate officer who has a fiduciary duty to protect certain information?

Trading is illegal when the SEC asserts that it concludes that information used in making a buy or sell decision was obtained from a breach of fiduciary duty, or a duty arising from a relationship of trust or confidence. The contention is that those possessing insider information that is not public should not be able to benefit or help others to benefit when other shareholders cannot similarly benefit. On the surface, that seems fair and reasonable but there is a school of thought that holds an opposing view, a view based on an understanding of how markets work and the value of knowledge. When an “insider” uses non-public information to buy or sell stocks, that act sends a signal to the market that can produce information that other share owners can use in making their buy and sell decision. The case for insider trading is based on improving market efficiency.

In the 1960s, Henry Manne, one of the founders of the school of law and economics and a former dean of the Scalia School of Law at George Mason, wrote a book challenging the assertion that insider trading imposed harm on shareowners and the market. His basic thesis was that more information makes the stock market more efficient and accurate no matter how that information is acquired. Manne’s points were that the practice of insider trading did no significant harm to long-term investors while it contributed to more efficient stock market pricing. Over the past 50 years, insider trading has been strongly defended in scholarly journals. Nobel Laureate Milton Friedman argued that insider trading is a good thing, allowing market prices to more quickly reflect important information.

Since insider trading as defined by the SEC includes both legal and illegal trading, many have made the argument that the present law simply cannot be effectively enforced because it impossible to define the activity in a way that would not also bar legitimate research and trading. Hence, the SEC has a blunt instrument that it can use to construct a case asserting violations on the basis of presumptions of knowledge because producing definitive and convincing evidence is not easy. Manne made the argument that insider trading is what bootlegging was to the probation era. Meaning that authorities can’t stop it: “The imagination of wealth seekers in using valuable information in the stock market will always outpace the ability of regulators to cope.”

It is doubtful that Congress will ever rein in the SEC or make insider trading legal because it is too easy to demagogue against doing so. But Congress can act to constrain regulatory abuse and raise the bar on what constitutes evidence. The need for a better and more objective standard was demonstrated in the insider trading case against Martha Stewart. In spite of her trying to back date records concerning her selling, there was no proof that she was aware that the advice she got from her broker was non-public or that she knew of a failed drug trial that caused the stock of ImClone to crash. More recently, the SEC accused professional golfer, Phil Michelson, of insider trading because he acted on a tip from a gambler to whom he owed money. There was no evidence that he knew that tip was insider information. Other cases of insider trading have also rested on assumed SEC prescience and connecting dots from a preconceived conclusion.

The system shouldn’t work that way. If Congress will not act for political reasons that leniency is selling out to the wealthy and Wall Street, at least it should set a clear standard that innocence should be assumed and guilt proven by a preponderance of factual evidence.

A New Road To Serfdom

Senator Elizabeth Warren’s Accountable Capitalism Act reflects her total ignorance of capitalism, how a market economy works, and the power of incentives. For someone who was on the faculty at Harvard before becoming a senator, she obviously never interacted with any of the world class economists who are on its faculty—Larry Summers, Martin Feldstein, Richard Cooper, Greg Mankiw, and Dale Jorgenson for example. They might have informed her that her ideas have been discredited by history.

If she wasn’t a senator, her proposal would be widely ridiculed. Since she is, her wooden headed notions of how to improve corporate performance have to be taken seriously, in case democrats capture Congress and the White House in 2020. In the late 1970s, one of her predecessors, Teddy Kennedy, introduced a bill to break up oil companies that came within four votes of passing the Senate. Her mindset reflects the growing enthrallment with an illusion of democratic socialism that is being embraced by the far-left wing of the democrat party and a large number of millennials. Democratic socialism is a dream; not a real economic and political system. Where socialism has been adopted, political freedom has been reduced and income inequality increased.

In the case of Senator Warren and to paraphrase Mark Twain, we should not worry about all that she doesn’t know but we should be seriously troubled by all the things she knows that just aren’t true. She believes that the search for profit is ruining capitalism and that instead of just being accountable to shareholders who put their capital at risk by investing in corporations, she wants them accountable also to all the people. Her way of achieving this is to require all corporations with revenue—not profits—of more than $1 billion to be federally chartered with bureaucrats in the Commerce Department overseeing and regulating them. Where would she find the equivalent of angels instead of bureaucrats to make sure that boards of directors and executives take into account the interests of workers and local communities in the decisions they make. How would those interests be determined?

She would also require that 40% of boards be filled with workers whose incentives would be anything but long term and strategic.

All of these changes are supposed to come at no cost. According to Matthew Yglesias in a Vox article, “Warren’s bill would fundamentally restructure corporate governance and redistribute trillions of dollars from rich executives and shareholders to the middle class – without costing a dime.” In evaluating this assertion and the Senator’s bill, Don Boudreaux, a professor of economics at George Mason University, made what should be an obvious point, “Whenever the government commands you to do that which you otherwise would not do, it imposes on you a cost, … And this cost neither disappears nor is rendered less real simply because the specific manner in which it is imposed results in it not appearing as a debit entry on the accounting artifact that we call the U.S. government’s budget.” He also observed that Yglesias has taken a different perspective in commenting that zoning regulations and a NIMBY philosophy stall housing development. “When too many people have regulatory veto power over market decisions, stagnation is the outcome, and it ends up hurting any number of people.” He obviously is not troubled by cognitive dissonance.

Senator Warren wants to solve a problem that generally doesn’t exist. In doing that unintended consequences would dominate. Her economist colleagues at Harvard could have informed her that when companies reinvest profits, they are benefitting workers because investments that increase productivity, lead to wage growth and acreate new jobs. And, buy backs don’t just enrich the ultra-wealthy, they enrich workers who have shares in the company and who have retirement funds, and IRAs. Buy backs are also an efficient way to shift money from firms who have an excess to those that don’t since buy back profits are generally reinvested.

In a competitive environment, companies reward workers appropriately to reduce the risk losing them and have compensation packages to attract workers to fill new jobs.

While making and increasing profits is a corporation’s first priority, it is not their only one as has been demonstrated by a simple look at what leading companies do in terms of R&D, community involvement, providing for worker education and other benefits, and their support for social issues. Once corporate decisions become more centralized in Washington, political and economic freedom will be victims because the concentration of power always leads to the erosion of political freedom. As Milton Friedman observed in Capitalism and Freedom,” When the government confiscates wealth to achieve her desired redistribution, the incentive to create more wealth will be reduced. Friedman also made the point that the forced distribution of income, government has been doing more harm … “the justification of government intervention in terms of alleged defects of the private enterprise system … are themselves the creation of government, big and small.”

Senator Warren and her other true believers in utopian illusions would lead us down Friedrich Hayek’s Road to Serfdom. Almost 80 years ago he warned, ”the most important change which extensive government control produces is a psychological change, an alteration in the character of the people. This is necessarily a slow affair, a process whch extends… over …generations.”


The Grand Bargain is the Grand Bamboozle

According to a recent article in InsideSources–Grand Bargain—some republican stalwarts who subscribe to the climate orthodoxy want to “substitute all the contradictions, preferments, subsidies, tax anomalies and self-defeating rules with a simple, revenue-neutral carbon tax.”  To promote this trade-off, they have created the Alliance for Market Solutions.  It is claimed that the backers of the Alliance are “rock-ribbed Republican business executives, academics and think-tank fellows” who are committed to turning the GOP toward taking a positive stance on climate change.

People like John Graham, former administrator of OIRA and Chris DeMuth, former president of the American Enterprise Institute who are Alliance backers should know better than to take part in what only can be described as a legislative/regulatory bamboozle.  Their Grand Bargain is another house of cards that has a non-existent foundation.

While no one disputes that human activities affect climate, claiming that the science has spoken is to be deaf to what it is actually saying.  Climate advocates consider the IPCC to be the gold standard for the state of climate science. And yet, the IPCC can only make guesstimates about natural variability.  Its estimate of climate sensitivity—the effect of doubling CO2 on global temperatures varies by a factor of 3 and fairly precise temperature measurements since satellite measurements that began in 1979 give every indication that climate sensitivity is no higher and probably lower than low end of the estimate—1 degree C. While evidence is getting stronger that the solar-climate link is not trivial, the IPCC has not given it weight of evidence that it deserves .  Those are just a few of the factors that undermine climate certitude.

Before the Alliance gets too far with its lobbying and PR campaign, it should answer the following question.  Why should anyone support a carbon tax when the US is already doing better in reducing CO2 emissions than the nations that are the biggest promoters of the Paris Accord?

Here is a chart from the 2018 BP Statistical Review of Global Energy–BP.

The real answer is the alleged trade-off is another Trojan Horse that hides an anti-fossil energy agenda and opens another door for Bootleggers and Baptists to pick the pockets of tax payers while pretending to be saving the earth from a climate apocalypse.  The culture of corruption known as The Swamp would get even more entrenched if this or any other of the proposed carbon tax schemes actually would get enacted.  The net effect would be virtually zero since the alleged connection is global emissions and temperature.  And anyone who believes that a carbon tax would be or stay revenue neutral surely believes in unicorns and leprechauns.   Revenue neutral carbon tax proposals are a scam!

Consumers Win; Bureaucrats Lose

The Trump Administration decision to roll back the second phase of Obama’s CAFÉ standards is a small v victory for consumers. A large V Victory would be an amendment to the Clean Air Act that abolishes the CAFÉ provision all together.

CAFÉ proves how difficult it is to get rid of bad policy once it is enacted into law.  Originally CAFÉ was justified as a means to reduce oil imports at the time of the Arab oil embargo as well as a way to reduce air pollution from mobile sources.  At the time, and since, almost all economists have argued that a gasoline tax would be far more cost effective in reducing gasoline consumption and achieving increased efficiency.   But legislators and regulators always believe that they know best what is in consumers best interests.  That is an example of the fatal conceit.

At the time the first CAFÉ standards were imposed they benefitted Japanese automakers because they specialized in manufacturing small high mileage cars.   Domestic automakers were forced to retool and make substantial investments to manufacture small cars and sell them at a loss to induce buyers to purchase them.  The larger effect was to make domestic automakers less competitive.

The other effect that was well documented was to increase highway fatalities and injuries because physics tells us that lighter vehicles hit by heavier ones will sustain more damage.  In spite of this fact, pressure continued to increase CAFÉ mileage standards.   In 2007, Congress passed energy legislation that mandated an increase from 22.2 mpg to 35 mpg in light duty vehicles.  In 2009, the wrong-headed Supreme Court decision on CO2 emissions allowed the Obama Administration to put CAFÉ on steroids by raising the standard to 34.1 mpg and then 54 mpg by 2025 as a weapon to fight climate change.

Since California had the worst air quality in the nation and had more stringent air quality standards at the time the Clean Air Act was passed, the Act contained a provision that allowed California to apply for a waiver to impose stricter auto emissions than federal standards. Over time, its standards for low emission vehicles were adopted by the auto industry.  Over the past 40 years, California like all other parts of the country has made tremendous progress in improving its air quality, especially in the LA Basin which is challenging because of its physical geography and population growth.  A 20- year study by the University of Southern California that was published in the New England Journal of Medicine reported in 2015 that “decreasing air pollution in Los Angeles has led to healthier lungs for millennials when compared to children in the ’90s. … Ozone was below the federal eight-hour standard for most of Los Angeles and the coastal basin and exceeded the standard fewer than 20 days a year. … It’s an environmental success story.”

Since 1973, air quality in the US has improved dramatically as emissions standards from stationery and mobile sources became more binding.  To justify ever more restrictive emission standards from light duty vehicles and trucks. EPA and its environmental supporters found ways to create health benefits out of thin air.  In the case of climate change which California uses as its justification for tighter standards and opposition to the EPA proposed rollback, any benefit, which is doubtful, is well within the margin of measurement error.

In issuing its phase1 CAFÉ standards for model years 2017-2021, EPA and the National Highway Transportation Safety Administration estimated that the annual implementation costs would range from $5.4 to $7.6 billion. The costs for the standards that are being rolled back would likely be as high if not higher since EPA assumed technologies that do not exist or which have not proven commercially practical.  Since the higher costs of CAFE are passed on to consumers through high prices for vehicles they represent an involuntary redistribution of discretionary income.

Advances in automotive technology some of which has been forced by the CAFÉ will continue because of on going R&D and the forces of competition.  Technology forcing by government is a blunt tool that produces unintended consequences exceeding intended ones.


The Disuniting of America: Pogo’s Wisdom

For most of our history, our political system reflected the importance of bipartisanship to find common ground on legislative issues.  This value was based on the understanding that the Constitution’s guarantees of individual rights was intended to protect the minority from tyranny by the majority.

For the Founding Fathers, common ground was essential to building the foundation of our government. The Founders and the colonists were motivated by England’s abuse of their rights as free men which became the catalyst for articulating “self-evident” principles. The prevailing philosophy for governing was best articulated by Henry Clay’s perspective that has been discarded in recent decades.  He said, “Politics is not about ideological purity, or moral self-righteousness, it’s about governing. If you cannot compromise you cannot govern.”

Although the political extremes of the left and right represent a minority of the public, they are disproportionately active and this has led to the polarization, that is an obstacle to progress. Polarization is reinforced by identity politics, which increasingly involves people acting on a preference for associating with people who share their views and for sources of information that reinforce those views.  They live in an echo chamber that produces black and white views and an intolerance for those who do not share them.  The current political system rewards those who pursue conflict and demonization, and punishes those who show a willingness to compromise.  People respond to incentives and the prevailing incentives are misaligned with the Clay’s principle of governing.

Several decades ago (some say in the mid 1990’s), bipartisanship and the search for common ground were replaced by the forces of polarization.  While this is seen in the inability of Congress to do the people’s business, Congressional dysfunction is the result, not the cause, of the polarization that is rampant in society.  As a society, we have become “Balkanized” and intolerant, with too many seeing only black or white with few if any shades of gray.  As a result, many of those who are sent to Congress reflect the ideological purity of the voters who elected them.  Ironically, the loss of bipartisanship and the collegiality needed to find common ground has led to the loss of trust in Congress.

If we want Congress to function better, we need to have representatives who do not view compromise as a character flaw, and who are more interested in solving problems than in scoring political points.  We will only get them when voters look in the mirror and realize that, as the cartoon character Pogo observed, “we have met the enemy and it is us”.

Too many in society have become less tolerant, less accepting, more judgmental, and single-issue voters.  Senator Orrin Hatch of Utah recently wrote that we need a Geneva Convention for the culture war…“we need a detente in partisan hostilities, an easing of tensions that can be realized when both side adopt certain rules of engagement”.  He’s wrong; what we need are not rules to govern incivility—we need a restoration of the principles of civility and good citizenship.  We also need to recognize that the actions of a minority are infectious and are spreading. The antidote starts with us; not in the halls of Congress. The majority needs to be a counterforce to the radical, political activists on the right and left who engage in demonization, intolerance, and scapegoating.

Character matters, and character is the foundation of good citizenship.  The majority needs to recognize the consequences of the downward spiral that is proving so corrosive. More citizens, the media, and thought leaders need to become more active in promoting respect for the rights of others, tolerance,  respect for laws and authority, and contributing to our communities.  Left and right—and everyone in between—would do well to remember words from Abraham Lincoln’s first inaugural address: “We are not enemies, but friends. We must not be enemies. Though passion may have strained, it must not break our bonds of affection. The mystic chords of memory will swell when again touched, as surely they will be, by the better angels of our nature.”

The Dubious Basis for a Carbon Tax

Rep Curbelo of Florida has introduced a carbon tax bill even though the House of Representatives have voted 229-180 to oppose any carbon tax legislation.  It is clear that no legislation is going to be passed and most likely that Rep Curbelo is simply using his proposalto bolster his campaign for re-election in November.

He has proposed a $24 per ton tax—the social cost of carbon– beginning in 2020 with the proceeds replacing the federal gasoline tax.  How did he pick $24 when the estimates often cited range from $15-$150 per ton?  It really doesn’t make any difference since the choice is driven by the climate orthodoxy, model estimates and judgments and assumptions by climate advocates.  In reality, the social cost of carbon which is reflected in any proposed carbon tax is nothing more than an intellectual exercise that has very little basis in science or empirical facts.

There are two fundamental pieces of information that are needed to make a more accurate calculation of the social cost of carbon.  First, it is necessary to know how the climate responds to emissions of CO2. That is how much global temperatures will increase from doubling of CO2– climate sensitivity.   The most recent estimate by the IPCC is between 1 and 4.5 degrees C.  That is a wide range of uncertainty and underscores how little is really known about the effects of CO2.

The second piece of information is how much of past temperature increases are due to natural variability and how much are due to human activities?  Climate advocates assert that humans are primarily responsible for temperature increases over the past 60 or so years. But the results of model runs based on this assumption significantly over-prediction actual temperature increase.  Roy Spencer has pointed out that the “pause has caused them a real problem.  “They are now coming up with reasons why there has been a “pause” …and spinning it as if it is bad news …. But when they assume that natural climate variations can cause a cooling influence, they are also admitting there can be natural sources of warming”. In other words, the climate establishment is masking its ignorance with more assumptions.  But, assumptions are not facts and neither are computer model results.

In addition to these problems, carbon tax proposals attempt to address a very long-time horizon which makes it impossible to know the effects of policies, how they will change over time, advances in technology and most important the extent of any future warming or change.  There is also the factthat atmospheric CO2 produces benefits in plant, crop, and forest growth as has been documented by the CO2 Coalition.

Rep Curbelo should abandon election year stunts and look at facts and think seriously about policy.  First, he should learn that the US is doing much better in reducing emissions than other countries without subjecting itself to too many overly stringent regulations or energy taxes .  Over the past decade for example, the US has reduced emission by almost 12% while Germany one of the greenest and most aggressively environmental counties.  Instead of prescribing a carbon tax, the right approach to climate policy is to first become familiar with the actual scientific facts and then adopt incremental policies based on changes in our state of knowledge. That is the proven approach to effective planning when uncertainty dominates.



Market Manipulation is Not Market Choice

Florida Congressman Carlos Curbelo plans to introduce a carbon tax bill to reduce carbon emissions, create incentives for clean energy, and use the proceeds to replace the gasoline tax. Although he refers to his legislation as market choice, it is just another example of market manipulation and energy suppression…

All of the carbon tax proposals that have been pushed in recent years are promoted as a cost-effective means to mitigate catastrophic damage from human caused climate change by reducing carbon dioxide emissions. The alleged damages are a collection of environmental hobgoblins–rapidly rising temperatures, rising sea levels, and increased hurricanes, tornados, and droughts.

It has been 30 years since climate change—aka global warming—became the number one environmental apocalypse. Over this three decades the asserted climate damages have been unsupported by empirical evidence. Temperatures have only risen a few tenths of a degree. Hurricanes have not gotten stronger, tornados have been declining, and sea level rise has not been accelerating. None the less, advocates continue to market an artifact of computer models and ignore what is taking place in the real world.

The problems with a carbon tax are much greater than just the lack of empirical evidence. To begin with, the so-called damage function that would be mitigated by the tax lacks precision because the estimate of climate sensitivity—how much temperatures increase from doubling of CO2—vary by a factor of 3. In addition, concern about atmospheric concentrations is global while the proposed Market Choice act only applies to the US. Dr. Ben Zycher of the American Enterprise Institute did an analysis of a carbon tax that was larger than the one being proposed by Rep. Curbelo–$30 versus $23. He concluded that the carbon tax effect in 2100 would be twenty-five one-thousandths of a degree. On a chart, that would be less that the width of a line drawn with a number 2 pencil and given the inherent uncertainties of models is essentially zero.

A carbon tax may be intellectually elegant to many economists and very appealing to free spending members of Congress because it is like an ATM machine without limits—small changes in the tax generate large sums of money.

Advocates of a carbon tax attempt to portray it as being simple. Has anyone known of a tax that was truly simple? In the case of a carbon tax, building political support would require provisions that benefit supporters—environmental groups, rent seeking corporations, affected populations like the poor and politically powerful users of energy, and groups dependent on government largesse. There is virtually zero probability of a carbon tax being a simple straight forward $X per ton of carbon emitted. Instead, a coalition of Baptists—those whose support is based on moral fervor and Bootleggers whose support is driven by profit and rent seeking.

Finally, Rep Curbelo’s proposal is predicated on shifting US energy use from fossil fuels to “clean energy” which continue to exist in the market place only because of subsidies and government mandates. Our economy needs energy to grow and prosper but that energy needs to be abundant and affordable. Rep. Curbelo wants to make it scarce and expensive. The example of Germany proves that point. Germany’s emissions reduction crusade has produced the highest electricity price in Europe, a prices three times greater than the average US electricity price.