The Good News—the Air is Getting Cleaner

The report can be summed up with this graphic from EPA:

GDP, vehicle miles traveled, population, and energy consumption have all increased since 1990. But despite the fact that more people are using more energy to produce more goods and services, air pollution emissions have decreased.

EPA reports that air quality has improved for the six main air pollutants:

Since 1990, nationwide air quality has improved significantly for the six common air pollutants. These six pollutants are ground-level ozone, particle pollution (PM2.5 and PM10), lead, nitrogen dioxide (NO2), carbon monoxide (CO), and sulfur dioxide (SO2). Nationally, air pollution was lower in 2008 than in 1990 for:

• 8-hour ozone, by 14 percent
• annual PM2.5 (since 2000), by 19 percent
• PM10 , by 31 percent
• Lead, by 78 percent
• NO2 , by 35 percent
• 8-hour CO, by 68 percent
• annual SO2 , by 59 percent

The below graphic, from EPA’s website, (but not in the actual air trends report) shows air quality trends since 1970. These trends are even more dramatic that the 1990 to 2008 numbers.

The Bad News: the Press Does Not Seem Interested in Telling the American People Our Air Quality has Dramatically Increased

This is good news that air quality continues to improve and even more so because the American people do not know it. According to a 2004 poll from the Foundation for Clean Air Progress, only 29 percent of people thought that “America’s air quality is better than . . . it was in 1970.”

One reason that the American people do not know this is because the press does not report on it.  So far not one major newspaper has written a story about the good news in this air trends report—there’s nothing from the Washington Post, New York Times, Los Angeles Times, or any of the other major news outlets. The only story we could find is from E&E News (a subscription-based environment and energy news service) and even then it was the 12^th story in their afternoon publication.

It’s tough for the American people to lean to the truth about air quality when the media does not report the good news.

Our Air is Getting Cleaner

Today we can breathe easier knowing that our air is much cleaner than in the past. Even though the media is not reporting this good news to the American people, our air quality has substantially improved and will continue to improve. The data shows the truth.

“What was offered today was nothing more than more of the same. Bipartisanship for the sake of bipartisanship may make for good headlines, but the proposal outlined today is a tripartisan bad idea for the American people – paving the way for a job-killing cap-and-trade system that will increase the price of energy across the board.

“The Senators claim that their approach is a ‘market-based’ one. More government mandates, regulations and huge amounts of taxpayer subsidies to unreliable, expensive energy forms – a key component of their plan – will not put our nation on a path toward energy and economic security and is the furthest thing from ‘market-based’. This is a ‘government-mandated’ approach that creates a ‘market’ out of thin air.

“As for the nominal attempts to expand domestic offshore energy exploration, nothing has changed. Commonsense action from the Obama Administration – not Congress – is what now stands between the American people and the vast job-creating energy resources on taxpayer owned lands. The Senators should spend their time urging the Obama Administration to stop its administrative embargo against America’s domestic energy supplies.

“Unfortunately, American families facing economic hardships are strikingly absent from this debate. And they realize that this proposal – like others being considered by Congress and by the EPA – will increase their energy bills, keep more American energy off-limits and cost even more jobs.”

Note: Click here to read the Senator’s framework.

For additional information, please contact Patrick Creighton, 202-621-2947, or Laura Henderson, 202-621-2951.

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FOR IMMEDIATE RELEASE
June 4 , 2009
CONTACT:
Laura Henderson
202.621.2951
Patrick Creighton
202.621.2947

Renewable Electricity Mandate: Pay More For Less

WASHINGTON—In advance of a Senate Energy Committee hearing on the renewable electricity mandate (REM), the Institute for Energy Research (IER) released the following fact sheet:

A National REM Would Increase the Cost of Electricity:

• Wind and solar electricity are significantly more expensive than efficient and reliable traditional electricity sources.
• Energy Information Administration (EIA) projections state that these sources will also be significantly more expensive than coal in 2016.

REMs are already Hurting Americans, Making it Harder for Small Businesses to Compete:

• 34 states already have renewable electricity standards
• Residential electricity rates are 38 percent higher and industrial rates are 50 percent higher in states with binding renewable mandates

The Electricity Sources Mandated are Not Efficient or Dependable:

• Wind generated 1.3 percent, geothermal 0.4 percent, biomass 1.3 percent, and solar less than 0.03 percent of the electricity Americans used last year.
• Energy Secretary Stephen Chu told the New York Times that solar technology would have to get five times better to be competitive in today’s market.

Americans will Pay for a National REM Twice: First as Taxpayers, then as Consumers:

• The Spanish government attempted to mandate and subsidize renewable electricity.
• Spain spent $753,778 of taxpayer dollars to create each green job.
• Spain gave $1,319,783 in subsidies to create wind industry jobs.

NOTE: A recent poll found that 58 percent of Americans said they were not willing to pay a penny more than they currently pay for electricity to combat climate change; 78 percent said that a $50 increase would cause financial ‘hardship.’

The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.

FOR IMMEDIATE RELEASE
May 19, 2009
CONTACT:
Laura Henderson 202.621.2951

Obama Motors: Costly, Bureaucratic, and Pointless

WASHINGTON—In response to President Obama’s newly introduced mile-per-gallon fuel mandate, Institute for Energy Research President Thomas J. Pyle issued the following statement:

“It is overwhelming to consider the ways this new mandate will harm the American economy. This stealth energy tax will significantly increase the cost of every single new car on the market. Early reports suggest that consumers can expect to pay between $1,000 and $3,000 more for small cars and up to $5,000 more for large cars. And the notion that these cost increases will pay for themselves would be charming, but for the many Americans who will no longer be able to afford a new car.

“The mandate demonstrates just how seriously the feds are taking their new role as car company chief: The government isn’t just going to make decisions about how best to run their operations. They’re also going to limit your choice of automobile and force you to pay more in the process—that is, those who can still afford a new car.

“Our crippled and crumbling auto industry will now be forced to revamp every car it puts on the market to comply with the government’s latest edict. Right now, only three models even come close to meeting the President’s latest mandate. Car companies should be free to focus on building cars Americans want to drive, not carrying out government policy.

“Most alarmingly, this plan, offered in the name of reducing carbon emissions, will not work. Even if every single car and truck in the U.S. met the new fuel economy mandate—a stretch, given that this mandate will only affect new cars—the U.S. would decrease carbon emissions by five percent. Carbon dioxide increases from China and the developing world would swallow that five percent by the end of September—that means Americans’ sacrifices, which they will be forced to pay for years to come—will be moot in four short months.

“Is now, when Americans are knee-deep in the biggest recession in generations, really the time to take on a significant new economic burden that will yield negligible results? Do we really want the future of our nation to be one in which the government tells you what kind of car you can buy and then makes you pay more for it? In our experience, the American people say no.”

NOTE: Earlier this year, when the EPA requested public comments regarding the State of California’s request to set its own fuel economy mandate, IER urged Americans to express their disapproval of the costly measure. That campaign spurred over 10,000 citizens to voice their concerns regarding fuel economy standards for California alone, unlike this measure, which will affect the entire nation.

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The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.

FOR IMMEDIATE RELEASE
January 26, 2009
CONTACT:
Brian Kennedy (202) 346-8826
Chris Tucker (202) 346-8825

IER: President’s Adoption of California Model on Energy Means Higher Costs, Fewer Jobs for Rest of America

Washington, DC – Institute for Energy Research (IER) president Thomas J. Pyle today issued the following statement on President Obama’s decision to allow carbon regulators in California to saddle the American auto industry with massive new cost and compliance burdens likely to be paid for by taxpayers and energy consumers across the country:

“At a time when taxpayers have already been asked to send billions of dollars to Detroit to save the American auto industry, the president’s decision to impose what amounts to a $1,050 tax on all new cars may render that investment moot. Unfortunately, for as high a price as Americans will now pay to comply with California’s carbon mandates, there is very little evidence that carbon emissions will actually go down as a result  – and even less to suggest our climate will be affected. In fact, if all cars and trucks in the United States were forced to adopt this standard, the emissions increases from the rest of the world would more than replace the reductions envisioned by this plan. By June. Of this year.

“Few states depend more on others for energy than California. Few states ask its citizens to pay more for their electricity. Today’s announcement ensures that working-class Californians will also have a harder time affording cars in the future. This is the California model on energy – a policy that’s led to the hemorrhaging of jobs and the near-bankruptcy of the state.  If this is a policy President Obama wants our nation to follow, we should prepare ourselves now for similar results.”

NOTE: Today, President Obama instructed the Environmental Protection Agency (EPA) to review the December 2007 denial of California’s request to create its own emissions standards for automobiles. The California Air Resources Board has estimated that the mandate will add at least $1,050 to the cost of each car and will cause the auto industry to slip further behind the technological curve as it struggles to adjust to California’s whims rather than needed efforts to retool to meet the imperatives of customer choice.

More from IER on the California energy model:

• Comment Submission: IER Encourages California Air Resources Board to Consider Implications of AB 32

• Press Release: AB 32 is Bad Medicine for California’s Struggling Economy

• IER Study: Green Jobs: Fact or Fiction?

The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.

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www.InstituteforEnergyResearch.org

GREEN JOBS: Fact or Fiction?

An Assessment of the Literature

January 2009

By Robert Michaels and Robert P. Murphy

Download as PDF

Introduction and Executive Summary
I. Green Recovery, Center for American Progress
II. Job Opportunities for the Green Economy, Political Economy Research Institute
III. Current and Potential Green Jobs in the U.S. Economy, Global Insight
IV. Renewable Energy and Energy Efficiency, American Solar Energy Society

Introduction and Executive Summary

Data compiled and recently released by the National Bureau of Economic Research (NBER) indicates that not only is the U.S. economy currently in recession, it has been for more than an entire year (since December 2007). What started as a financial crisis on Wall Street quickly evolved into a much deeper economic crisis on Main Street, with unemployment now at a 16-year high. What’s worse, the recovery seems elusive, and a prolonged recession cannot be ruled out. Keynesian economics is once more fashionable in the corridors of power in Washington, with plans taking shape for a massive infrastructure program (much of it expected to be “green”) to get the economy moving again.

In this environment, some have seized upon the “Green Economy” as a cure for both the nation’s current economic ills, and as a way to address the issues of global warming and energy security. According to this view, government at all levels can use fiscal and regulatory measures to spur massive new investments in renewable energies and energy efficiency, which will create millions of new “green jobs.” Proponents claim that such programs will not only rescue the economy from recession, but will also put the country on track to a sustainable, low-carbon energy future. The new Administration and the incoming 111th Congress are in apparent agreement with this overall strategy, differing perhaps only in the details.

Unfortunately, it is highly questionable whether a government campaign to spur “green jobs” would have net economic benefits. Indeed, the distortionary impacts of government intrusion into energy markets could prematurely force business to abandon current production technologies for more expensive ones. Furthermore, there would likely be negative economic consequences from forcing higher-cost alternative energy sources upon the economy. These factors would likely increase consumer energy costs and the costs of a wide array of energy-intensive goods, slow GDP growth and ironically may yield no net job gains. More likely, they would result in net job losses.

In the present article we critically examine four recent studies on the alleged benefits of government programs to foster green job creation: the Center for American Progress’ (CAP) Green Recovery: A Program to Create Good Jobs and Start Building a Low-Carbon Economy [i], the Political Economy Research Institute’s (PERI) Job Opportunities for the Green Economy: A State-by-State Picture of Occupations that Gain From Green Investments [ii], the U.S. Conference of Mayors’ Current and Potential Green Jobs in the U.S. Economy [iii], and finally the American Solar Energy Society’s (ASES) Renewable Energy and Energy Efficiency: Economic Drivers for the 21st Century [iv]. Although each report is unique, a common characteristic is that they all rest on incomplete economic analysis, and consequently greatly overstate the net benefits of their policy recommendations. Below we summarize these general problems, while in subsequent sections we analyze each report in turn.

Mistaking a labor-intensive energy sector as the goal, rather than efficient energy provision.

Energy is the lifeblood of the economy. The primary objective of the energy sector is to supply cost-effective energy to the broader economy, allowing it to grow and increase the standard of living of its citizens. Artificially pumping up employment in the energy sector per se—and thereby driving down productivity, while driving up costs to the broader economy—is counterproductive to overall net job creation and economic growth. It is a sign of increased efficiency if more energy can be produced and delivered with fewer workers, because this expands the overall output potential of the economy. Yet the green jobs studies that we analyze in this report reach the opposite conclusion, and favor energy sources that require more workers to yield a given amount of energy. By analogy, the number of workers in the U.S. devoted to agriculture has steadily declined over the last century, and this is a healthy sign of progress in the U.S. economy. Government efforts to reverse the trend, and force more workers back into agriculture, would not “create jobs” in the long-run, but would simply raise food prices and shrink other sectors.

Counting job creation but ignoring job destruction.

Even if job creation per se is the goal, the studies fail to properly account for the job destruction that their recommendations would entail. For example, the Center for American Progress (CAP) study recommends a $100 billion expenditure to be financed through the sale of carbon allowances under a cap-and-trade program. CAP estimates that this “fiscal stimulus” will result in the creation of two million jobs [v]. Yet the CAP methodology treats the $100 billion as manna from heaven; it does not consider the direct and indirect adverse effects (including job destruction) of imposing higher costs on a wide array of energy-intensive industries and thereby raising prices for consumers.

Double counting of jobs and overly simplistic treatment of the labor market.

The green studies critiqued in this report implicitly assume that there is a limitless pool of idle labor which can fill the new “green” slots created by government spending. Yet to the extent that some of the new green jobs are filled by workers who were previously employed, estimates of job creation are overstated, perhaps significantly so. In addition, the studies do not account for the rise in worker productivity over time. Thus their long-range forecasts of total jobs created by green programs are inflated, even on their own terms.

To its credit, CAP alludes to potential “inflationary labor shortages from job creation” [vi] due to its proposed program, but dismisses the concern as irrelevant for an economy in recession. The thinking is that the workers going into the new green jobs will simply reduce the unemployment rate, rather than siphoning talented people away from other industries. The CAP analysis ignores the fact that other industries, not favored by the green subsidies or mandates, would have been able to draw on the pool of unemployed workers as the economy recovers. With fewer workers seeking jobs, job creation in “non-green” sectors will be lower than it otherwise would have been. Moreover, some of the infrastructure plans will require a long time to implement and then reach completion. Their implementation over time could contribute to “inflationary labor shortages” once the current recession has passed.

Ignoring the role of the private sector.

Nowhere in CAP or the other three studies is there a discussion of the role of the private sector in their proposed green jobs programs. No consideration appears to have been given to the fact that government cannot direct the labor and capital markets more efficiently than market wage and interest rates. In fact, history is replete with evidence that government lacks this ability. The syn-fuels program of the late 1970s is a classic example of labor and capital being pulled, at government’s direction, into lower-value uses than the industries into which market forces would have channeled them. The studies also omit any discussion of cutting the marginal tax rates on labor and capital to increase incentives to work and invest. Arguably this is the most effective, and only sustainable way to revive economic growth.

How much government support of “green” markets is enough? Are the programs sustainable?

The studies propose potentially massive government intervention in energy markets, both with respect to electricity generation and transportation fuels. It is important to consider the current levels of subsidies before considering further market intervention in the energy markets. In FY 2007, total federal energy subsidies were estimated by the U.S. Department of Energy’s Energy Information Administration (DOE EIA) [vii] at $16.6 billion, spread across more than a dozen energy sources as seen in the figures at the right and below.

On an absolute dollar basis, renewables receive over twice the level of subsidies compared with conventional energy sources. And on a dollar per Btu or MWh basis, the level of subsidy of renewable energy is orders of magnitude (more than 100 times) greater than levels for conventional energy.

Government picking of winners and losers, a classic example of unsound energy policy.

All sources of commercially viable energy have a role in supplying the energy required by U.S. consumers and the nation’s economy. In fact, at some point in the future—especially if oil prices return to their previous levels—it may be efficient for the United States to obtain a significantly larger share of its electricity and transportation needs from renewable energy sources. However, the programs proposed in the studies reviewed in this paper would require, at some level, government officials to make choices as to which technology areas to further support/subsidize (solar, wind, ethanol, etc.). It is very unlikely that government-directed programs picking winners and losers would yield a more efficient energy mix than what would be determined in the market absent massive government intervention. On what basis will government officials make the decisions as to what technologies to support, and given the existing levels of subsidies, would the additional levels of support be sustainable in the future?

Similar reasoning applies to assessments of efficiency measures that “pay for themselves.” If adding new insulation, or installing a solar panel, really would save more money than the initial cost (including interest), then it is unclear why governments need to further subsidize the improvements. Presumably private business and households do not need to be aided in the process of furthering their self interest.

Assuming that potential benefits from new technologies will only occur through government programs.

Another major issue with the studies is to conflate the benefits of new technologies and energy efficiency, with the benefits of government programs in these areas. For example, the American Solar Energy Society (ASES) report estimates that by 2030, the state of Ohio could see two million jobs related to energy efficiency [viii]. Such figures lead it to conclude that “if we fail to invest in RE&EE [renewable energy and energy efficiency], the United States runs the risk of losing ground to international RE&EE programs and industries.” [ix] But if the “we” refers to taxpayers, rather than private investors, the ASES argument is unsound. After all, many industries will provide millions of jobs for Ohio in the year 2030, and this happy outcome doesn’t require government funding or oversight.

Having summarized some of the major shortcomings common to the four studies, we now proceed to an analysis of each

I. Green Recovery, by Pollin et al., Center for American Progress (CAP)

Both of Pollin’s papers, Center for American Progress and Political Economy Research Institute (CAP and PERI), are built around a policy that will allocate $100 billion from the federal government among six “green economy” strategies: retrofits to buildings, expansion of mass transit, building a “smart” electric grid that allows better management of production and consumption, expanding wind power, expanding solar power, and promoting research in “next generation” biofuels [x]. In this section we discuss the CAP study, while in Section II we address the PERI study.

A. No Free Lunch on Emission Allowances: Study Fails to Incorporate the Costs of the Proposed Program

CAP sees a need for only two annual deficit payouts of $100 billion. It expects that in two years the federal government will be auctioning permits required to emit greenhouse gases, and that the program will produce $75 to $200 billion in annual revenue [xi]. If so, as the reasoning goes, the government can invest it in the green program with no adverse effects as business will pay for the permits. In reality the requirement to purchase the permits amounts to a new tax that must be borne by someone. Either output prices will rise or the profits that can be reinvested in businesses will fall. Either way, some of the demand for the economy’s output will vanish. The CAP study touts the benefits of a “multiplier,” whereby federal spending of $100 billion leads to spillover benefits, increasing the total economic expansion beyond the initial injection. Yet CAP fails to acknowledge that this multiplier effect also works in reverse. If carbon-intensive industries must pay an additional $100 billion to the federal government to purchase emission permits, then ultimately this implicit tax hike will contract economic output beyond this figure, because workers in the penalized industries now have less money to spend on local goods and services such as restaurants, etc. The government doesn’t create wealth simply by taking $100 billion from one group of firms and handing it over to a different group of businesses.

B. Flawed Measurements of Green and Other Jobs

The CAP study generates its main results through three steps: (1) estimating the direct effects of the spending on workers and goods, (2) using an input-output table which estimates the “indirect” effect on employment due to purchases made by the direct recipients, and (3) estimating “induced” jobs that come from later rounds of re-spending through a “multiplier” process. CAP’s readers will be unable to trace the path of the calculations in (1) and (2) because it does not present the complex underlying model, instead promising full details in a forthcoming study [xii]. Because CAP has no explicit model to generate induced jobs, the authors searched the economic literature for multiplier values. Faced with a range of possible values (some negative), they arbitrarily chose to estimate them as 1/3 of the total direct and indirect jobs, asserting that the choice was “conservative.” [xiii]

Despite the appearance of sophistication, the CAP analysis generates spurious numbers because of the improper underlying assumptions. In subsection A above, we have already discussed the problem with the “multiplier” approach: it counts the positive spillover effects on job growth from an exogenous increase in spending, but the analysis doesn’t use the same approach to account for the destruction of economic activity from the tax hike (or deficit increase) needed to fund the original injection of federal dollars. The CAP analysis neglects the adverse economic impacts that its recommended cap-and-trade system would yield, particularly for energy-intensive goods and services.

Finally, the input-output model implicitly assumes an infinitely elastic supply of unemployed workers. The CAP analysis counts up all of the jobs created directly and indirectly as a result of the green jobs program, but it does not account for the fact that at least some of those workers (and the money they in turn spend) will be siphoned from other industries. To the extent that some of the workers in the new, green positions simply will have moved from previous jobs, obviously there is no increase in total “spending” in the economy. In fact such cases present net losses to total output, because the government intervention directs those workers from higher-valued occupations into lower-valued ones. (If the opposite were true, then it wouldn’t take federal programs to move the workers.)

C. CAP’s Unrealistic Model of Labor Markets

CAP’s basic model of unemployment is very unrealistic. Unemployment is almost everywhere a transitional stage in which a person moves between a job that he or she no longer has (possibly because of a voluntary separation) and an open vacancy. CAP instead envisions a large number of unemployed who have for some reason lost their jobs and would take any that were available, if only someone (here the government) spent enough money to fund the positions. As an example, CAP notes that employment of construction workers dropped by 800,000 between July 2006 and July 2008 [xiv]. The report calculates that its green program will generate 2 million year-long jobs, and if they are the right types, the 800,000 construction workers will fill some of them, along with 1.2 million others. The study sees no costs of job transfer because recent data tell us that 8 million people will still be unemployed. This might be the case if the unemployed were a large stagnant pool, but they are not.

Workers change jobs and enter or leave the labor market at surprisingly high rates, and employers originate and close job slots with similar speed. In a typical quarter between 2000 and 2005, over 9 percent of U.S. workers changed employers, entered unemployment, or left the labor force. Another 9 percent were hired from other employers, left unemployment upon finding jobs, or entered the labor force from outside [xv]. Construction workers are more mobile than average. The same quarterly data show that for every 100 construction job slots in existence, approximately 14 new ones open up and another 14 are “destroyed” as projects are completed [xvi]. The project-specific nature of much construction work is one factor responsible for their above-average unemployment rates. Implementing CAP’s green policy will not change this characteristic of the construction industry—workers will simply be retrofitting older buildings instead of building new ones.

The unemployed themselves are a heterogeneous group. In 2007, 7.1 million were unemployed at any one time on average. One million of them were on temporary layoffs with high probabilities of returning to their old jobs [xvii]. Another 2.8 million were either entering the job market for the first time or returning from spells out of the labor force when they were not seeking work. Moreover, 1.1 million were between 16 and 19 years old, many surely living with families and hardly in hardship [xviii]. For the workforce as a whole, in October 2008 the median spell of unemployment was 10.6 weeks, during which many received unemployment compensation [xix]. The unemployment rate fluctuates with general economic conditions. In October 2007 it was 6.5 percent for construction workers (all workers average 4.4 percent) but the subprime crisis and drop in housing construction and deteriorating national economic conditions had brought it up to 10.7 percent in October 2008 [xx]. As of the latter month, the median spell of unemployment for construction workers was 8.8 weeks, two weeks less than the national average [xxi].

In short, the CAP study would have us believe that there is a large, stagnant pool of unemployed workers, who can be tapped to fill new green job slots without reducing output in other industries. But in reality, “the unemployed” is a constantly changing group, and government-created job openings will certainly hamper the private sector’s ability to direct job seekers into the most productive outlets.

D. Domestic Content

Economists disagree on many things, but the one area of consensus is that free trade raises living standards for all countries. Yet the CAP study contends that its green program is additionally desirable because a high proportion of the payouts will be spent on domestically produced goods, whose manufacture increases domestic employment:

The green investment program relies much more on products and services made within the U.S. economy and less on imports compared to spending either within the oil industry or on household consumption. These direct and indirect effects on job creation are the most sig¬nificant reason why the green investment stimulus program creates more jobs than a household-consumption stimulus. [CAP, p. 11]

Even on its own terms the CAP analysis doesn’t consider that with a massive new stimulus of $100 billion from the federal government, the green sector may see some of its costs rise, and will turn more and more to foreign imports for some of its key components. There is already a growing volume of international trade in renewables hardware, and the CAP program would amplify the trend [xxii]. There is of course nothing wrong with the renewables industries drawing on the cheapest inputs available, but the trend undercuts one of CAP’s arguments.

To repeat, the goal of energy producers is not to “create American jobs” but to provide energy to consumers at the lowest prices possible. If the energy industry uses some of its earnings to make foreign purchases, this is to contain costs and keep energy prices lower than they otherwise would be.

II. Job Opportunities for the Green Economy, by Pollin and Wicks-Lim (PERI)

As noted in Section I above, both of Pollin’s papers (CAP and PERI) are built around a policy that will allocate $100 billion from the federal government among six “green economy” strategies: retrofits to buildings, expansion of mass transit, building a “smart” electric grid that allows better management of production and consumption, expanding wind power, expanding solar power, and promoting research in “next generation” biofuels [xxiii]. In the previous section, we discussed various shortcomings in the CAP analysis, touting the alleged benefits of this program. In the present section, we focus on an issue unique to the PERI study.

The job-creation strategies recommended in CAP and PERI can only work if a sufficient number of workers with the requisite skills are available. The PERI study seeks to demonstrate that the relevant workers really are available to fill the millions of newly-created green positions. The PERI authors use input-output tables and occupational statistics to choose ten “representative jobs.” For example, wind farms require sheet metal workers, biofuels require chemists, and both require industrial truck drivers. PERI then examines the availability of people qualified for these jobs in each of 12 states. Using data on the numbers in each state employed in each type of job, the study concludes that the requisite skills to carry out its program are currently available.

Although it is less clear in PERI, the CAP study makes clear that “job creation” means that the chosen policy will reduce unemployment rather than take already-employed workers from their positions. If so, the data employed in PERI are thoroughly inappropriate. To see if the newly created jobs can be filled, instead of counting the employed the PERI study should have determined how many qualified people are unemployed. If there are 1,000 machinists in the state and 95 percent of them are employed, there are only 50 people who matter for (net) job creation. If an employed person changes to a green employer and no unemployed are available, his or her previous output is lost – one job has been created and another lost. PERI presents no data on whether the state’s unemployed population have characteristics that would allow them to quickly fill new jobs, many of which appear to require dedicated education or substantial training.

The PERI study fails to note that the skilled workers who are important to its findings generally have lower unemployment rates than the average for the labor force as a whole. In October 2008 the national unemployment rate was 6.1 percent, but “Managerial, Professional, and Technical” workers had an overall unemployment rate of 3.0 percent [xxiv]. The highest occupational unemployment rate was 10.1 percent for construction workers, a consequence of the past year’s collapse of homebuilding. In general, however, the “good jobs” are those with low turnover that have smaller numbers of unemployed. This means that federal efforts to create high-paying jobs will likely fill many of the new positions from the pool of already-employed workers, rather than drawing entirely from the ranks of unemployed workers.

III. U.S. Conference of Mayors, Current and Potential Green Jobs in the U.S. Economy,by Global Insight

A. How to Categorize Green Jobs?

This study and the next (ASES) attempt to estimate long-term employment in growing markets for renewable power and energy efficiency. While PERI and CAP looked at the effects of a single spending injection, these studies examine the jobs created by longer lasting green policies. Any estimates will depend on which particular workers and products are classed as green, and there are no clear boundaries between green and non-green. This arbitrariness allows researchers to choose boundaries that might give their readers quite different impressions about markets. It appears that these two studies are seriously biased toward a vision of large markets with high potentials for growth.

The Conference of Mayors study estimates that there are 751,000 green jobs today. As an example of the problem in defining the boundary between green jobs and ones of a different color, consider the choices of industries and job types to include in “renewable power generation,” an activity that bridges several standardized federal classifications. The study’s authors used a proprietary database to estimate 127,000 jobs in this area—a figure that appears quite high, but one that readers without access to the data cannot analyze. We can, however, conclude that the researchers probably created an overly high figure on several grounds. First, unlike most other studies, this one defined large hydroelectric and nuclear facilities as renewable alongside the more usual wind, biomass, geothermal and solar resources [xxv]. In 2006, nuclear units provided 19.3 percent of the nation’s power and hydroelectric facilities produced 7.1 percent. In contrast, the narrower class of renewables produced only 2.4 percent of the nation’s power [xxvi]. As defined in the study, “renewable” power output is twelve times greater than that of generators customarily defined as renewable by most environmental advocates. If so, considerably fewer than 127,000 workers currently hold jobs associated with non-hydro and non-nuclear renewables.

Other data in the study are also hard to interpret. The study claims that over half of those employed in green jobs (in the combined renewable and efficiency areas) held engineering, legal, research and consulting positions, a seemingly high figure that apparently does not include managers and supervisors. Lacking access to Global Insight’s database, we cannot further check their calculations or comment on the reasonableness of such numbers.

B. Productivity and Employment

As best can be determined, none of the four studies attempts to account for growth in worker productivity. This means that if output of a certain industry doubles, these studies assume that employment will do likewise. In reality, workers everywhere in the economy become more productive with the passage of time – their formal education continues to increase, they accumulate experience on the job, and they have more productive technologies to work with. Adjusting for expected productivity increases dramatically lowers the employment potential calculated in studies like these. A consensus estimate is that worker productivity in the U.S. has increased on average by 2 percent per year since 1970 [xxvii]. The compound growth of productivity means that a worker in 2038 will be the equivalent of 1.81 workers in 2008. If productivity does not increase, the Council of Mayors study projects a growth in green jobs from 750,000 today to 4.2 million in 2038. If we adjust for productivity growth, the planned 2038 outputs of renewable power, retrofits, etc. will require only 2.3 million workers rather than the 4.2 million that the study forecasts.

C. Renewable Generation: Performance and Potential

After broadly defining the renewable industry, the Council of Mayors study goes on to paint a picture of expanding markets that can only grow further. In reality, with the single exception of wind, U.S. power production from renewables has stagnated for the past fifteen years. Table 1 below shows that the total output of wood burning, waste burning, geothermal and solar power plants fell from 73.0 billion kilowatt hours (twh) in 1994 to 69.8 in 2007 [xxviii].

U.S. Power Generated by (non-Hydro) Renewables, 1994 and 2007

Source: U.S. Energy Information Administration, Electric Power Monthly (Aug. 2008) Net Generation by Other Renewables: Total, at http://www.eia.doe.gov/cneaf/electricity/epm/table1_1_a.html

The seemingly impressive growth figures that appear in the Council of Mayors study reflect careful choices of data rather than meaningful trends. For example, on page 7 the study enthuses about a 23% increase in solar output between 2000 and 2007, which equates to 2.95 percent per year. Electricity generated from solar sources (photovoltaic plus thermal) equaled .0145 percent of total power, which grew at 1.28 percent per year in the same period. If its noted recent rates of growth persist, solar will produce 1 percent of the nation’s power supply by the year 2261 [xxix].

The failure of all renewables (other than wind) to expand from 1994 to 2007 occurred in the face of increasing political pressures to build renewables for the mitigation of climate change, including laws in over half the states that require utilities to invest in renewables. Indeed, the growth of wind power is largely an artifact of its favorable tax treatment rather than its economic viability. Wind turbines receive a federal production tax credit, currently 2 cents per kilowatt-hour, accelerated depreciation and additional benefits in some states. Investment in wind turbines has dropped by 75 percent or more in periods when a federal production tax credit lapsed [xxx]. After massive infusions of research and development funding, renewables remain the economic choice only in special situations. Renewables have environmental impacts of their own, and residents in numerous localities are coming to resist them as they already resist the siting of conventional powerplants near them. The growth of a renewables industry is far from guaranteed, and there are no known official projections that match the expected growth figures in the Council of Mayors study.

The document contains other misleading statements about the performance of renewables. With the exceptions of geothermal and hydro power, renewables are intermittent, e.g. solar units only produce when the sun is shining and wind units when the wind is blowing. Reliability requires additional investments in a full scale power grid and conventional generation. Thus the claim on page 6 that “wind generation in 2007 was enough to power more than 2.9 million homes” is misleading. Even though the total power generated by wind was equal to the total power used by 2.9 million households, it is not true that wind alone could have powered them, because of its intermittent nature.

IV. American Solar Energy Society, Renewable Energy and Energy Efficiency: Economic Drivers for the 21^st Century (ASES)

A. Definitional Differences

With no standardized definitions of the renewable and energy efficiency industries, authors of reports like these have a wide range of plausible choices. The Conference of Mayors calculated 751,000 jobs in the two industries today [xxxi]. ASES chose a far more expansive definition, and also provided figures on both direct jobs and indirect ones created by the input purchases of directly funded employers. It estimated 193,550 direct workers in renewable energy, 50 percent more than the Council of Mayors assumed under its own expansive definition of renewables. Both include workers in retrofits and directly related manufactures, e.g. insulation, in their definitions of the efficiency industry. ASES, however, includes jobs in the building of cars that exceed federal fuel economy standards by 10 percent or more, as well as appliances, computers and HVAC equipment that meets Energy Star or similar standards. Definitions like these yield a total of 3.5 million direct jobs in efficiency today, and 8.0 million direct and indirect [xxxii]. To see the arbitrariness, note that ASES’ estimate of today’s total jobs in the efficiency industry is 2.7 times the number of efficiency jobs the Council of Mayors projects for 2038 [xxxiii].

Unllike the Council of Mayors, ASES provides three growth scenarios but does not state their assumptions in detail. There is a “base case” in which laws and technology change little from today, a “moderate scenario” and an “advanced scenario” with legal and technological innovations that strongly favor renewables [xxxiv]. The base case brings forth 16.3 million direct and indirect jobs by 2030, and the advanced scenario 40.1 million. Like all of the other studies, it does not net out any employment lost as opportunities in the conventional power industry vanish and as industries that produce energy-intensive goods shrink due to higher energy costs rippling through the economy. Extrapolating from available data, the study estimates that renewables and efficiency will directly employ 17.4 million workers in 2030 in the advanced scenario [xxxv]. In a projected labor force of 180 million, fully 10 percent will be directly employed in renewables and efficiency.

B. The Implications of Job Creation

The larger the percentage of the workforce engaged in producing renewable power and efficiency, the smaller will be the output of other goods. The ASES study appears to argue that growth in renewable and efficiency workers is in itself desirable, but it is hard to see why if this shrinks the workforce available to produce other valuable goods and services. ASES and the Council of Mayors say nothing about where these workers will come from and how the change will affect the well-being of consumers.

The fact that building and operating renewable power generators requires more labor time than for conventional generators is a signal that the nation should not rush toward renewables in the haste that so many are urging today. If a megawatt of solar capacity requires four times the workers as a megawatt of coal-fired power, building the solar plant makes the nation poorer, other things equal [xxxvi]. The public is worse off because it sacrifices the outputs that those workers could have produced had they been employed elsewhere. The people purchasing the solar power enjoy a lower standard of living than was necessary.

Solar power is expensive, but may have environmental virtues that conventional power does not. The way to make a case for it is to compare its environmental attributes and its cost, which will be higher if more workers are required to build it. All of these studies implicitly argue in favor of renewables and efficiency improvements because building them creates job slots that conventional power does not. But this confuses mere job creation per se with the more important goal of creating high value-added jobs that efficiently use scarce labor resources to produce the most valuable output possible. Other things equal, it is a vice, not a virtue, if one production technique requires more labor hours to produce the same amount of energy. Indeed, it is precisely because of their higher costs that alternative sources currently do not pass the market test, and cannot compete without government assistance.

[ii] Robert Pollin and Jeannette Wicks-Lim, Job Opportunities for the Green Economy: A State-by-State Picture of Occupations that Gain from Green Investments, Political Economy Research Institute, University of Massachusetts, Amherst, June 2008. Cited in text as “PERI.”

[iii] U.S. Conference of Mayors, Current and Potential Green Jobs in the U.S. Economy, prepared by Global Insight, Oct. 2008. Cited as “Conference of Mayors.”

[iv] American Solar Energy Society, Renewable Energy and Energy Efficiency: Economic Drivers for the 21^st Century, prepared by Management Information Services, Inc., 2007. Cited as “ASES.”

[v] CAP p. 3.

[vi] CAP p. 12.

[vii] EIA, “Federal Financial Interventions and Subsidies in Energy Markets 2007” (April 2008), Table ES5, page xvi, available at: http://www.eia.doe.gov/oiaf/servicerpt/subsidy2/index.html.

[viii] ASES p. 46.

[ix] ASES p. 51.

[x] PERI p. 3.

[xi] CAP p. 15. He provides no citations for the dollar amounts.

[xii] CAP p. 20.

[xiii] CAP p. 22.

[xiv] CAP pp. 12-13.

[xv] Steven Davis et al, “The Flow Approach to Labor Markets: New Data Services and Micro-Macro Links,” Journal of Economic Perspectives 20 (Sum. 2006) 3-26, p. 6.

[xvi] Ibid p. 8.

[xvii] Lawrence Katz and Bruce Meyer, “Unemployment Insurance, Recall Expectations, and Unemployment Outcomes,”Quarterly Journal of Economics 105 (Nov., 1990), 973-1002.

[xviii] U.S. Bureau of Labor Statistics, Current Population Survey Table A-27 (Nov. 2008), at http://www.bls.gov/cps/cpsaat27.pdf.

[xix] U.S. Bureau of Labor Statistics, Economic News Release, Table A-9 (Nov. 2008), at http://www.bls.gov/news.release/empsit.t09.htm.

[xx] U.S. Bureau of Labor Statistics, Economic News Release, Table A-10 (Nov. 2008), at http://www.bls.gov/news.release/empsit.t10.htm.

[xxi] U.S. Bureau of Labor Statistics, Current Population Survey Table A-37 (Nov. 2008), at http://www.bls.gov/web/cpseea37.pdf.

[xxii] International trade in renewable hardware is large and increasing. General Electric is the only important US producer of wind turbines, and its share of the domestic market fell from 59 to 44 percent between 2005 and 2007. U.S. Department of Energy, Annual Report on U.S. Wind Power Installation, Cost, and Performance Trends 2007 at 10. China is rapidly increasing its production of photovoltaics for both domestic use and exports.

[xxiii] PERI p. 3.

[xxiv] Engineers, architects, and legal occupations (all important in some job creation studies) were slightly higher, at 3.7 percent. U.S. Bureau of Labor Statistics, Current Population Survey, Table A-30, at http://www.bls.gov/web/cpseea30.pdf.

[xxv] Conference of Mayors, p. 5.

[xxvi] U.S. Energy Information Administration, Electric Power Annual 2007. http://www.eia.doe.gov/cneaf/electricity/epa/epat1p1.html.

[xxvii] See U.S. Energy Information Administration, Outlook for Labor Productivity Growth 2004, at http://www.eia.doe.gov/oiaf/archive/aeo04/issues.html.

[xxviii] U.S. Energy Information Administration, Electric Power Monthly (Aug.. 2008) Net Generation by Other Renewables: Total, at http://www.eia.doe.gov/cneaf/electricity/epm/table1_1_a.html.

[xxix] Even at their 2006 – 2007 growth rates (Solar 19.23%, All power 2.33%), solar becomes 1 percent of total power generated in 2033. Data are from U.S. Energy Information Administration, Electric Power Monthly (Aug. 2008), Net Generation by Energy Source: Total (All Sectors) at http://www.eia.doe.gov/cneaf/electricity/epm/table1_1.html and Net Generation by Other Renewables: Total (All Sectors) at http://www.eia.doe.gov/cneaf/electricity/epm/table1_1_a.html.

[xxx] Ryan Wiser et al, Using the Federal Production Tax Credit to Build a Durable Market for Wind Power in the United States, Lawrence Berkeley National Laboratory LBNL-63583 (2007) at 3. http://eetd.lbl.gov/ea/emp/reports/63583.pdf.

[xxxi] Conference of Mayors, p. 5.

[xxxii] ASES p. 31.

[xxxiii] The Council of Mayors number (at 17) is the total (4.2 million) less renewable power generation (1.2 million).

[xxxiv] ASES p. 39.

[xxxv] ASES does not split its projections into direct and indirect jobs. Today, however, they estimate direct jobs at 43 percent of the total. ASES p. 31.

[xxxvi] These are the numbers assumed by Daniel Kammen et al, Putting Renewables to Work: How Many Jobs Can the Clean Energy Industry Generate?” University of California Berkeley Renewable and Appropriate Energy Laboratory, 2004 at 10. http://rael.berkeley.edu/files/2004/Kammen-Renewable-Jobs-2004.pdf.

FOR IMMEDIATE RELEASE
December 18, 2008
CONTACT:
Brian Kennedy (202) 346-8826
Chris Tucker (202) 346-8825

IER CEO: Obama Energy Plan Resurrects Malthusian ‘Limits to Growth,’ Enron ‘Green’ Energy Plays

HOUSTON – History warns against the energy plan proposed by President-elect Barack Obama, according to a new book written by the CEO and founder of the Institute for Energy Research.

“The heavy political push for ‘sustainable’ energy—wind power, solar power, and efficiency mandates—is akin to the failed 1970s Carter energy plan and Enron’s illusory ‘green’ energy strategy,” said Robert L. Bradley Jr., author of Capitalism at Work: Business, Government, and Energy. “All this reflects energy alarmism and climate alarmism, yet the alarmists have misfired time and again with their scares about famines, mineral-resource exhaustion, global cooling, and now global warming.”

Capitalism at Work reviews the dismal record of alarmism, including the 1972 work by the Club of Rome, Limits to Growth. The Carter Administration embraced limits on growth and distorted energy markets and the whole economy—and was electorally vanquished by Ronald Reagan. Reagan explained his rejection of energy planning—Obama take note—in his inaugural address of January 1981 (quoted on p. 285):

In this present [energy] crisis, government is not the solution to our problem; government is the problem. From time to time we’ve been tempted to believe that society has become too complex to be managed by self-rule, that government by an elite group is superior to government for, by, and of the people. Well, if no one among us is capable of governing himself, then who among us has the capacity to govern someone else?

Capitalism at Work also recounts how the late Enron persuaded then-Texas Governor George W. Bush to sign into law the nation’s strictest renewable-energy mandate to aid struggling Enron Wind Corporation. What Bush did to Texas in 1999, Obama is about to propose for the entire nation.

Bradley, who worked at Enron for 16 years, details Enron’s climate alarmism and “green” energy initiatives at www.politicalcapitalism.org.

Capitalism at Work is available from M & M Scrivener Press and Amazon.com.

The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.

#####

www.InstituteforEnergyResearch.org

FOR IMMEDIATE RELEASE:
December 11, 2008
CONTACT: Charlotte Baker
Interviews@FactsOnEnergy.org

IER Encourages CARB to Consider Economic
Implications of AB 32
CARB Charges Staff to Revise Economic Analysis by
December 2009

Washington, DC – This week the California Air Resources Board formally adopted its Scoping Plan for AB 32 that would initiate a series of drastic (if aspirational) cuts to future emissions of carbon. The plan included a resolution to address the economic costs of AB 32 and charged the staff with revising the economic analysis by December 2009. The Institute for Energy Research (IER) submitted formal comments to the California Air Resources Board (CARB) this week before thier vote urging CARB to address the deficiencies with the economic analysis before moving forward with implementation.

IER has serious concerns regarding the plan’s analytical findings, perhaps the most glaring of which claims the implementation of AB 32 will help save the California economy by saving its residents money and creating new jobs. Outside analysts have reached a far different conclusion. A recent study
commissioned by the Electric Power Research Institute estimated that California’s greenhouse gas regulations will cost between 0.2 and 1.2 percent of gross state product.

IER’s comments addressed the weaknesses of CARB’s analysis, including the plan’s inaccurate depiction of the tradeoffs involved and consequences to be expected from AB 32. Specifically, the comments support the assertion that CARB (i) overestimates the environmental benefits likely to result from AB 32’s targets for greenhouse gas emissions, and (ii) underestimates the costs in terms of reduced economic output of AB 32.

Robert Murphy, chief economist at IER, characterized CARB’s economic analysis as deeply flawed and perhaps willfully misleading, giving no guidance on the impact of AB 32 or even acknowledging a responsibility to pursue that analysis. “Before deciding on whether to go ahead with AB 32, policy-makers need to know how high its price tag will be. But CARB’s analysis claims that AB 32’s aggressive targets are not only free, but will actually boost the California economy! Though I am encouraged CARB is updating their economic analysis to address the deficiences we laid out in our comments we need to see CARB staff come back with a serious weighing of the tradeoffs before they pursue implementation.”

IER urges CARB to address their concerns and perform a proper analysis before moving forward with implementation. IER praises CARB for calling on staff to revise its economic analysis and urges policy-makers to delay implementation until CARB receives a more honest and accurate assessment of AB 32’s economic impacts.

To speak with IER’s experts please contact Charlotte Baker at:

Interviews@FactsOnEnergy.org or (202)434-8200.

The Institute for Energy Research (IER) conducts historical research and evaluates public policies in the oil, gas, coal, and electricity markets. Founded in 1989 from a predecessor non-profit organization, IER is a public foundation under Section 501(c)(3) of the Internal Revenue Code. IER articulates free-market positions that respect private property rights and promote efficient outcomes for energy consumers and producers. For more information visit www.instituteforenergyresearch.org.

Synopsis (104KB)

Complete Analysis (60KB)

The following comparison of Barack Obama’s and John McCain’s energy and environmental plans comes from the statements of their plans on their official web sites. The text first indicates what the respective plans say on each topic, and then provides IER’s analysis of each topic within the program.

Table of Contents

CAFE
Advanced Vehicle R&D
Electricity Grid
Energy Efficiency
Biofuels
Energy Tech
Energy Independence
Global Warming
• Synopsis
• Nuclear Power
• Windfall Profits Tax
• Renewable Electricity
• Clean Coal Technology
• Domestic Oil Production
• Alaskan Gas Pipeline
• SPR/Tax Holiday
• Energy Speculation

Nuclear Power

Obama: Acknowledges that nuclear power is needed to meet greenhouse gas emissions reduction goals. Says it is necessary to address the security of nuclear fuel and waste, waste storage, and proliferation before expansion of nuclear power can be considered. Does not believe that Yucca Mountain is a suitable site for waste storage. Will lead Federal efforts to look for safe, long-term disposal solutions based on objective, scientific analysis. Will develop requirements to ensure that the waste stored at current reactor sites is contained using the most advanced dry cask storage technology available [1].

McCain: Wants to construct 45 new nuclear power plants by 2030 with an ultimate goal of constructing 100 new plants. Does not want to be dependent on foreign suppliers for nuclear reactors or plant components, supporting their construction in the U.S. [2] Supports Yucca Mountain and research into nuclear-waste reprocessing [3].

Analysis: Analyses of climate change proposals by EIA, EPA, NAM/ACCF and others have shown that nuclear power is needed to meet greenhouse gas emission reduction goals [4]. Nuclear power currently generates about 20% of the electricity in the U.S. [5] but over 75% of the electricity in France [6]. DOE has been working on Yucca Mountain as the waste disposal facility since 1987 but the process has been slowed because of opposition, and recently it was disclosed that it will not be opened before 2025. The Carter Administration banned reprocessing of waste, a “recycling” process. To require, as Senator Obama proposes, that waste storage and other issues be resolved before expansion of nuclear power can occur, would essentially remove the nuclear option from the generation mix in the near and mid-term period when technology options for mitigating greenhouse gas emissions are limited.
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Windfall Profits Tax

Obama: Will require oil companies to take a reasonable share of their windfall profits and use it to provide a rebate to help pay for higher energy costs to U.S. consumers. The rebate would be $500 per individual and $1000 per married couple and would be paid for through 5 years of the “tax” on oil companies [7].

McCain: Does not support a windfall profits tax, which “will hinder investment in exploration and new production.”[8]

Analysis: President Carter enacted a windfall profits tax in 1980. The Congressional Research Service indicated that the tax, which was repealed by President Reagan in 1988, lowered domestic energy production by 1.2% to 4.8%, resulting in increased foreign oil imports [9]. According to the Energy Information Administration, the major oil companies already pay a substantial amount of taxes, which in 2006, totaled $90 billion [10].
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Renewable Electricity

Obama: Ensure that 10% of our electricity comes from renewable sources by 2012, and 25% by 2025. Extend the Federal production tax credit for 5 years to encourage the production of renewable energy [11].

McCain: Encourages the market for alternative, low carbon fuels such as wind, hydro, and solar. He believes in an even-handed system of tax credits that will remain in place until the market transforms sufficiently so that renewable energy no longer merits taxpayers’ dollars [12]. Does not believe in a Federal Renewable Portfolio Standard; believes targets for renewables are best adopted at the state level [13].

Analysis: The production tax credit for wind and other renewables has been extended 6 times, and most recently by the “bailout” bill [14]. Twenty-five states and the District of Columbia currently have renewable portfolio standards, but they differ widely on what they consider a renewable to be and the dates for the targets to be met [15]. Only Texas has met its targets for renewable generation [16]. There are areas, particularly in the south, which do not have good wind resources and would have a harder time meeting Federal targets [17]. Their utilities would have to purchase credits to make up for the shortfall in renewable capacity [18]. The “Renewable Portfolio Standard” is a semantic device, as it is not a standard so much as it is a mandate. By compelling utilities to produce or purchase a certain percentage of their electricity from renewable sources, laws and/or regulations may be requiring consumers ultimately to purchase more expensive energy than they would otherwise choose to do in a free market. Making energy more expensive deliberately is a matter that deserves more public debate. Moreover, making energy more expensive in the U.S. affects American competitiveness in trade and other matters.
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Clean Coal Technology

Obama: Will provide incentives to accelerate private sector investment in commercial scale zero-carbon coal facilities, by instructing DOE to enter into public private partnerships to develop 5 “first-of-a-kind” commercial scale coal-fired plants with carbon capture and sequestration [19].

McCain: Will commit $2 billion annually to advancing clean coal technologies. When commercialized will also export them to developing world economies to promote an international green economy [20].

Analysis: Coal produces almost 50 percent of U.S. electricity [21]. Climate change studies by Government and private agencies have shown that since carbon capture and sequestration (CCS) technology is not currently commercially available, most of today’s coal generating plants would need to be replaced by non-carbon or lower-carbon emitting technologies to meet greenhouse gas targets. This will come at a major expense to the U.S. economy [22]. DOE had been funding a Future Gen clean coal project, but has withdrawn support due to the huge increases in cost. Instead, DOE plans to support only the CCS portion of future projects [23]. The U.S. has the largest supplies of coal in the world. Any comprehensive energy policy must include coal given its predominant role in our electrical supply system.
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Domestic Oil Production

Obama: Wants oil companies to drill in the 68 million acres that they have leased but from which they are not producing energy. Promotes energy production in Bakken Shale in Montana and North Dakota, and in the National Petroleum Reserve-Alaska [24]. Contends companies could produce 4.8 million barrels more per day domestic oil if oil companies were currently producing on all currently-leased areas [25]. Supported limited Outer Continental Shelf (OCS) energy production in formerly-banned areas as part of a broader energy package including concessions for renewable technologies [26]. Opposes energy production in the Alaska National Wildlife Refuge (ANWR) [27].

McCain: Wants to expand domestic oil exploration and production to the previously banned areas of the OCS to lessen U.S. imports of foreign oil, increase U.S. domestic supplies, and reduce the U.S. Federal Trade deficit [28]. Does not support drilling in ANWR at this time [29].

Analysis: Until the U.S. Congress allowed the OCS moratoria to expire at the end of September, American oil leasing had been prohibited on most of the OCS in the lower 48 states since 1982. The moratoria had limited energy exploration and production to a mere 3% of America’s offshore OCS lands. This made the U.S. the only developed nation in the World to restrict access to its offshore energy resources. The Minerals Management Service (MMS) estimates that the outer continental shelf contains 86 billion barrels of oil and 420 trillion cubic feet of natural gas, both conservative estimates since bans on offshore leasing have made it illegal to explore [30]. It is now necessary to ensure that Congress does not reinstate the moratoria as they are threatening to do and that the leases are not tied up in legal disputes.

While neither candidate currently advocates exploration in ANWR, U.S. Geological Survey (USGS) estimates that the “1002 Area” contains a mean expected value of 10.4 billion barrels of technically recoverable oil [31]. The 1002 Area is not designated as wilderness; there are no trees, deepwater lakes, or mountain peaks. The 1002 area could produce about one million barrels of oil per day, which is about 20 percent of our daily domestic production and would make ANWR the single largest producing field in North America [32]. It would also extend the life of the Trans Alaskan Pipeline, which is currently operating at 1/3 of its original capacity. ANWR would generate large amounts of revenue for the federal government from royalties, as well as corporate income taxes. For example, a recent Congressional Research Service Report found that developing ANWR would produce $191 billion in new federal revenues from corporate income taxes and royalties [33].

Additionally, the United States has significant quantities of energy potential in its onshore federal lands that are not leased, as well as in its oil shale deposits, the world’s largest. Unlike other energy sources which require subsidies and/or mandates, the use of government resources to meet our energy needs not only creates jobs, but also enormous quantities of revenue.

The claim that oil companies are deliberately withholding production on 68 million acres has been debunked and is no longer taken seriously by energy analysts [34]. Oil companies do not know exactly where profitable deposits of oil and natural gas will be found until they actually drill, and so naturally at any given time, a portion of leased land will not be in production. If the oil companies were truly withholding 4.8 million barrels per day, that would imply they were ignoring $140 billion in gross revenues per year (assuming a price of $80 per barrel). It would also be curious that oil companies were lobbying for the ability to pay for additional leases on previously banned lands, if they had already paid for access to more oil and gas than they wanted to sell.
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Alaskan Gas Pipeline

Obama: Wants to work with stakeholders to facilitate construction of this natural gas pipeline [35].

McCain: Believes in promoting and expanding the use of our domestic supplies of natural gas, including building the infrastructure needed to transport it [36].

Analysis: Natural gas currently supplies 23 percent of our energy needs [37]. Besides heating many U.S. homes, it is used for electricity production and in industrial processes. It is the least carbon-intensive of the fossil fuels. The Energy Information Administration predicts that natural gas use will grow [38], and many studies have shown that natural gas is needed as a transitional fuel under scenarios to reduce greenhouse gases [39]. Alaska has 35 trillion cubic feet of known quantities of natural gas and experts expect the potential is much greater. These supplies of natural gas could be used in the lower 48 states if construction of the pipeline were undertaken.
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SPR or tax holiday

Obama: Supports releasing 70 million barrels of oil from the government’s Strategic Petroleum Reserve (SPR) to increase oil supplies and reduce gasoline prices [40]. The light oil released from the SPR would be replaced later with heavier oil [41].

McCain: Opposes the use of the SPR to reduce gasoline prices, believing it should be used in the event of an emergency cutoff of imports. Instead, he suggested reducing gasoline prices by temporarily suspending the 18-cents-per-gallon Federal gasoline tax [42].

Analysis: The SPR was developed in 1975 as a response to the 1973 oil embargo against the West. The U.S., in conjunction with other OECD nations, keeps spare stocks of oil in case oil is used as an economic weapon. The President has the authority to release crude from the SPR in time of a national emergency. President Bush has done so in the aftermath of Hurricanes Katrina and Ike, when offshore production facilities and refineries were temporarily closed for repair, replacing the crude once the facilities were operational. Both the SPR withdrawal and temporary Federal tax holiday would have, at best, short-run benefits, and they would come at the cost of reduced security against another oil embargo (for the SPR drawdown) and an increased Federal budget deficit (for the tax holiday). We believe that a better solution than either of these proposals is adding new domestic supplies from the more than 96% of government owned lands and waters currently not leased for energy. This achieves the goal of price relief for consumers, because increased supplies lead to lower oil prices, and it turns the two negatives of the Obama and McCain plans into positives: That is, increasing domestic production reduces U.S. vulnerability to foreign embargoes, and it also would provide extra revenue for the Treasury.
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Energy Speculation

Obama: Plans to enact legislation to close loopholes in Commodity Futures Trading Commission regulations and increase market transparency [43].

McCain: Wants to reform the laws and regulations governing the oil futures market and provide oversight [44].

Analysis: Studies by the Commodity Futures Trading Commission showed that there was no evidence that speculators were responsible for high oil prices [45]. Also, if the price of oil were above the levels that fundamentals of supply and demand could support, there would be growing inventories, which there were not. Successful speculators actually make oil prices less volatile, by buying when prices are low and selling when prices are high (or ”shorting” when prices are high and then covering when prices are low). Major producers and consumers of oil use futures markets to “hedge” themselves against future volatility by locking in a fixed “futures price” of oil. Large investment funds provide liquidity to the commodities futures markets, and allow producers and physical consumers (such as airlines and refiners) to concentrate on their core businesses.

Government restrictions on investment in the oil futures market would only hurt consumers by making the oil market less efficient. New regulations will do nothing to ease oil prices in the long term [46]. Additional supplies help temper any speculation, also. Since President Bush announced the lifting of the presidential moratorium on July 14, 2008, oil prices have fallen by almost 50%. Congress’ decision to allow the OCS energy moratorium to expire October 1, 2008 has further sent a message to markets about American willingness to produce its own energy.
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CAFE

Obama: Will increase fuel economy standards 4 percent per year, going beyond the 35 mpg requirement in 2020 mandated by the Energy Independence and Security Act of 2007 [47].

McCain: Will enforce existing CAFE standards by increasing the penalties for not complying with the standards, which many auto manufacturers currently pay and add to the price of their cars [48].

Analysis: Like all markets, automakers will supply the market with vehicles that consumers demand. In the past, consumers preferred increased horsepower and larger vehicles rather than more fuel efficient and smaller vehicles. In the past, consumers have preferred more sport utility vehicles and light trucks, than smaller vehicles. Higher oil and gasoline prices have moved the car purchasing market to more fuel efficient vehicles, though some consumers still prefer the safety features in the heavier vehicles. The issue related to increasing the CAFE standard beyond the current legislated level is whether technologies exist to meet a higher standard. Also of note, by restricting consumer choice CAFE standards have lead to more deaths and injuries than otherwise because CAFE forces carmakers to build smaller cars than consumers would prefer. CAFE may save gasoline, but it costs lives [49].
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R&D and Tax Credits for Advanced Transportation Vehicles

Obama: Wants to mandate that all new vehicles are flex-fuel vehicles. Spend U.S. tax dollars on advanced vehicle technology; put 1 million plug-in electric vehicles on the road by 2015. Provide a $7,000 tax credit for the purchase of advanced technology vehicles and conversion tax credits. Convert the White House fleet to plug-ins within one year of becoming President. Make half of all cars purchased by the Federal Government be plug-in hybrids or all-electric by 2012. Provide $4 billion in retooling tax credits and loan guarantees for domestic auto plants and plant manufacturers so that new fuel-efficient cars are built in the U.S. rather than overseas [50].

McCain: Supports flex-fuel vehicles and wants automakers to make a more rapid switch to flex-fuel vehicles than their current commitment. Proposes a $300 million prize to improve battery technology for full commercial development. Provides a $5,000 tax credit for purchase of a zero emission car and a graduated tax credit for other vehicles based on their carbon emission levels [51].

Analysis: Studies regarding tax credits show that they have limited ability to spur change compared to their cost to the U.S. Treasury and the American taxpayer. The Energy Information Administration, for example, evaluated the impact of tax credits on the energy system on both a cost and carbon emission basis finding their cost per unit high and their benefit to lowering carbon emissions and energy consumption low [52]. IER believes that prizes for technology development should be privately funded, not taxpayer funded. Prizes should be awarded by private foundations and they would receive the patent rights for their nonprofit.
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Electricity Grid

Obama: Will spend U.S. tax dollars on smart metering, distributed storage and other advanced technologies. Will establish a Grid Modernization Commission to facilitate adoption of Smart Grid practices. Will instruct the Secretary of Energy to: 1.) establish a Smart Grid Matching Grant Program to provide a subsidy of one-fourth of qualifying investments; 2.) conduct programs to deploy advanced technologies for managing peak load reductions and energy efficiency savings; and 3.) establish demonstration projects [53].

McCain: Wants to upgrade the national grid to meet the electricity demands of the 21st century, including a capacity to charge electric vehicles. Promotes deployment of SmartMeter technologies that provide consumers with real-time energy consumption usage to encourage cost-efficient use of power [54].

Analysis: The candidates appear to be silent on the issue of grid instability related to delays, lawsuits and red tape associated with upgrading the grid and building sufficient power capacity to ensure grid stability. In a technology driven modern economy, this is a foundation of economic strength. A recent USDA study of rural community electric demands pointed out a need to double capacity in rural areas by 2020 [55]. The North American Electricity Reliability Council reports that the capacity margins (the amount of electricity necessary to maintain the reliability of the electrical grid) are low and could drop below target capacity margins as soon as 2009 in many areas of the country [56]. The Independent Service Operators throughout the nation predict looming shortfalls in production and transmission capability in urban areas, and new demands from non-dispatchable sources (intermittent sources like new wind and solar projects) only complicate that. Moreover, there is little discussion by the candidates about the inherent conflicts of siting new alternative energy sources.
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Energy Efficiency

Obama: Reduce electricity demand 15 percent from DOE’s projected levels by 2020 by setting demand reduction targets for utilities and more stringent building and appliance standards.

Establish a goal to make all new buildings carbon neutral by 2030. Establish a goal to improve new building efficiency by 50 percent and existing building efficiency by 25 percent. Overhaul the process for setting appliance efficiency standards to eliminate the missed deadlines by the Department of Energy for setting updated appliance efficiency standards. Achieve a 40 percent increase in efficiency in all new federal buildings within 5 years and ensure all new federal buildings are zero-emissions by 2025. Invest in cost-effective retrofits to achieve a 25 percent increase in efficiency of existing federal buildings within 5 years. Provide resources to achieve a 15 percent reduction in federal energy consumption by 2015. Work with states to flip the profit model for the utility sector so that shareholder profit is based on reliability and performance as opposed to total production. Commit to weatherize one million low-income homes each year for the next decade [57].

McCain: Will make greening of the Federal Government a priority by applying a higher efficiency standard to new buildings leased or purchased or retrofitting existing buildings [58].

Analysis: Both candidates support compelling the federal government to use less energy in its operations, strategies that may pay dividends for the largest consumer of energy in the nation. But these strategies will come at a cost. Already, some Federal buildings are kept uncomfortably hot in the summer, and uncomfortably cool in the winter to save energy. The imposition of demand reduction targets for the nation may result in significant additional economic burdens on consumers of energy which would affect consumer prices as well as the prices of the goods and service produced in the U.S. which must compete with other nations’ goods.
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Biofuels, Mandates, & Subsidies

Obama: Will require at least 60 billion gallons of advanced biofuels by 2030. Will spend federal tax dollars, provide tax incentives and government contracts into developing the most promising technologies and their infrastructure. Will mandate all new vehicles are flex-fuel [59].

McCain: Believes alcohol-based fuels hold great promise as both an alternative to gasoline and as a means of expanding consumers’ choices. But, believes a level playing field is needed and will eliminate mandates, subsidies, tariffs, and price supports that focus exclusively on corn-based ethanol and prevent the development of market-based solutions that would provide better solutions [60].

Analysis: The Energy Independence and Security Act of 2007 (EISA) requires 36 billion gallons of biofuels by 2022–15 billion gallons of corn-based ethanol and 21 billion gallons of advanced biofuels [61]. Currently there are no commercially-available advanced biofuels on the market. Based on the lower mandates in the Energy Policy Act of 2005, EIA’s Annual Energy Outlook 2007 [62] showed that economic levels of biofuels were projected to be 7.6 percent (or 14.6 billion gallons) of the 192 billion gallon gasoline market in 2030. Their Annual Energy Outlook 2008 [63], which incorporated the EISA mandate by requiring that the provisions of EISA be met, reached 32.5 billion gallons in 2022, slightly below the target due to the application of waivers and modification of credit volumes resulting from inadequate quantities of biofuels to meet the initial targets.

That forecast was also dependent on the commercial availability of cellulosic ethanol, which is not commercially viable today. Currently there are multiple mandates and subsidies that encourage the sale of ethanol. For example, in many areas of the country retailers are required to sell gasoline that is 10 percent ethanol to meet clean air regulations.

Also there is a 51 cents per gallon of ethanol subsidy for ethanol [64]. Without these subsidies and mandates, the ethanol industry would not have developed as much. This is especially true because there is less energy is a gallon of ethanol than in a gallon of gasoline, it is more expensive to produce ethanol than gasoline, and there are other negative factors such as its impact on water and land usage and food prices. Mandating 60 billion gallons by 2030, 67 percent higher than the current mandate in just 8 additional years is making an already difficult task harder, and could have even more dramatic impacts on food prices and water and land usage issue.

Government mandates of any kind distort markets, and ethanol is no exception. The ethanol mandate is already leading to higher food prices [65]. Higher food prices have led to food riots around the world [66]. Increasing food prices are making life more difficult for the world’s poor, leading UN Special Rapporteur for the Right to Food, Jean Ziegler, to call using food crops to produce ethanol “a crime against humanity.”[67]

Not only are there serious human costs to the current ethanol mandates, but there are large environmental costs as well. Recent studies published in Nature argue that biofuel production releases 17 to 420 times more carbon dioxide than the fossil fuels they replace.”[68] Increased carbon dioxide emissions are not the only environmental harm biofuel production promotes. Biofuel production has also led to converting millions of acres of rainforest into biofuel plantations [69].

Besides the human and environmental products ethanol mandates produce, it is difficult to comprehend how it is possible to mandate the use of a product in the future that cannot presently be produced commercially, such as cellulosic ethanol. The U.S. has the world’s largest oil shale deposits, from which DOE estimates 800 billion barrels are recoverable. Currently it is not produced commercially, and no candidate has supported a mandate for its production by a date certain. The purpose of this comparison is to demonstrate that mandates are by definition, the government picking winners and losers as opposed to freely motivated individuals operating in a free market.
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Energy Technology Development

Obama: Wants to spend $150 billion over 10 years to accelerate the commercialization of plug-in hybrids, promote development of commercial scale renewable energy, encourage energy efficiency, invest in low emission coal plants, advance the next generation of biofuels and infrastructure, and begin transition to a new digital electricity grid [70].

McCain: Will spend $2 billion annually to advancing clean coal technology. Will establish a permanent tax credit equal to 10 percent of wages spent on R&D, which will simplify the tax code, provide an incentive to innovation, make the U.S. more competitive with other countries, and remove the uncertainty facing businesses in their R&D decisions. Faces a level playing field for mandates, subsidies, tariffs, and price supports that promote the development of market-based solutions [71].

Analysis: Markets work better than government-directed programs to finding solutions to problems. This is because government programs are driven by political considerations not economic effectiveness like markets. Since 1978, the DOE has spent over $75 billion on research and development into various energy sources, and our energy problems are more acute than ever [72]. Far larger amounts have been dedicated to energy programs through the tax system, to the same end. During the same period of time, the amount of acreage made available for leasing for energy production to the private sector has plunged dramatically, with the ultimate result of less domestic production of oil and gas.

Meanwhile, permitting of electrical transmission lines, energy pipelines and energy facilities has grown more difficult and time consuming, and in capital intensive industries such as energy, time equals money, which the consumer of energy eventually pays. Even today, large subsidies for alternative energy generation exist on the one hand, while on the other hand, government laws and regulations have led to delays in the deployment of new wind farms or solar energy production facilities. Neither candidate has addressed the schizophrenic nature of the government’s policies upon energy production, transmission and use in the U.S.
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Energy Independence

Obama: Wants to save more oil than we currently import from the Middle East and Venezuela combined within ten years [73].

McCain: Wants to achieve strategic energy independence by 2025. Will continue to import oil from our North American neighbors, Canada and Mexico [74].

Analysis: Imports of oil from the Middle East and Venezuela were 3.53 million barrels per day in 2007 or 26 percent of our total oil imports of 13.47 million barrels per day [75]. The U.S. has sufficient domestic energy resources to replace these imported sources, as about 97% of offshore government lands and 94% of onshore government lands have not been leased for energy production [76]. Furthermore, our oil shale resources have not been touched, with over 800 billion barrels of recoverable shale oil that can be made commercially available with the properly structured Government leasing program. To meet the goals, the candidates will need to remove the red tape from Government restricting and/or delaying the use of these resources [77]. Government actions have for several decades led to severe reductions in the quantity and quality of government lands leased for energy production [78]. By letting energy exploration occur on much less lands, the government has been effectively stockpiling energy at a time when energy prices have hurt the American economy. Allowing more energy production is proven to make a significant difference in energy supplies, as the Energy Information Administration recently reported [79]. When more wells are drilled, more supplies are found. The candidates have not directly addressed this simple fact in a fashion that the American people can understand.
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Global Warming

Obama: Implement a cap and trade program to reduce greenhouse gas emissions 80 percent below 1990 levels by 2050. Require all emission credits to be auctioned. Use $15 billion per year of the auctioned receipts to subsidize the development of clean energy and energy efficiency improvements. Use remaining receipts as rebates and other transition relief for families and communities. Engage with the U.N. Framework Convention on Climate Change and make the U.S. a leader on climate change. Establish a Low Carbon Fuel Standard that requires fuel suppliers in 2010 to begin to reduce the carbon content in their fuel by 5 percent within 5 years and 10 percent within 10 years [80].

McCain: Implement a cap and trade system to reduce greenhouse gas emissions 66 percent below 1990 levels by 2050. Emission permits will eventually be auctioned to support the development of advanced technologies and reduce impacts on low-income American families. Will reform federal government research funding and infrastructure to emphasize the commercialization of low-carbon technologies. Will provide leadership for effective international efforts through actively engaging to lead United Nations Negotiations [81].

Analysis: Under a cap-and-trade system, there is a limit set on total greenhouse gas emissions. Each regulated entity is required to hold an allowance (essentially an entitlement) for the total amount of greenhouse gases they are allowed to emit. Allowances are distributed to emitters by some criterion (e.g. historic emissions), auctioned, or by some combination of the two. Entities are allowed to buy and sell allowances, creating a market price for them. Several cap-and-trade bills have been proposed in Congress, but none has passed to date. Many studies have been done on the various proposals. The studies show that mandates limiting GHG emissions will impose very large costs on the economy in terms of lost GDP, and higher costs to consumers, particularly in the cost of electricity [82].

Because the major growth in greenhouse gases are in developing countries like China, India, and the Middle East, U.S. emission reductions are likely to have little impact on global emissions. For example, if the U.S. were to eliminate all carbon dioxide emissions by 2030, world-wide CO2 emissions would still increase by about 30 percent [83]. In addition, many economists argue that an appropriately calibrated, explicit tax on carbon could achieve the same long-run emissions reductions as a cap-and-trade program, but with less scope for corruption and with lower total compliance costs [84]. (IER does not endorse a carbon tax, [85] but it would be more straightforward than the “stealth tax” of the cap-and-trade approach endorsed by both presidential candidates).
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Citations

1. http://my.barackobama.com/page/content/newenergy
2. http://www.johnmccain.com//Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
3. http://www.iht.com/articles/ap/2008/08/09/america/Energy-Next-President-Highlights.php
4. Energy Information Administration, Energy Market and Economic Impacts of S.2191, the Lieberman-Warner Climate Security Act of 2007, http://www.eia.doe.gov/oiaf/servicerpt/s2191/index.html, Environmental Protection Agency, EPA Analysis of the Lieberman-Warner Climate Security Act of 2008, http://www.epa.gov/climatechange/downloads/s2191_EPA_Analysis.pdf, and American Council for Capital Formation/National Association of Manufacturers Study of the Economic Impact of the Lieberman-Warner Climate Security Act, http://www.accf.org/nam.html
5. Energy Information Administration, Annual Energy Review 2007, http://www.eia.doe.gov/emeu/aer/contents.html.
6. Energy Information Administration, International Energy Annual, http://www.eia.doe.gov/iea/.
7. http://my.barackobama.com/page/content/newenergy
8. http://www.johnmccain.com/Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
9. Congressional Research Service, Energy Tax Policy: History and Current Issues, http://assets.opencrs.com/rpts/RL33578_20080917.pdf
10. EIA, Financial Reporting System, http://www.eia.doe.gov/emeu/perfpro/btab02.html
11. http://my.barackobama.com/page/content/newenergy
12. http://www.johnmccain.com//Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
13. http://news.cnet.com/8301-11128_3-10031450-54.html
14. Energy Information Administration, Federal Financial Interventions and Subsidies in Energy Markets 2007, http://www.eia.doe.gov/oiaf/servicerpt/subsidy2/index.html.
15. Energy Information Administration, Annual Energy Outlook 2008, page 27, http://www.eia.doe.gov/oiaf/aeo/index.html
16. “A National Renewable Portfolio Standard: Politically Correct, Economically Suspect,” Robert J. Michaels, April 2008 Electricity Journal.
17. For example, see this map showing the potential for wind generation http://www.windpoweringamerica.gov/wind_maps.asp and this map showing the potential for solar generation: http://www.nrel.gov/gis/images/us_csp_annual_may2004.jpg.
18. Democrats Challenge Each Other In Battle Over Energy Bill, Ian Talley, Dow Jones Newswires, September 11, 2007.
19. http://my.barackobama.com/page/content/newenergy
20. http://www.johnmccain.com//Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
21. Energy Information Administration, Annual Energy Review 2007, http://www.eia.doe.gov/emeu/aer/contents.html.
22. Energy Information Administration, Energy Market and Economic Impacts of S.2191, the Lieberman-Warner Climate Security Act of 2007, http://www.eia.doe.gov/oiaf/servicerpt/s2191/index.html, Environmental Protection Agency, EPA Analysis of the Lieberman-Warner Climate Security Act of 2008, http://www.epa.gov/climatechange/downloads/s2191_EPA_Analysis.pdf, and American Council for Capital Formation/National Association of Manufacturers Study of the Economic Impact of the Lieberman-Warner Climate Security Act, http://www.accf.org/nam.html.
23. http://www.energy.gov/news/5912.htm, http://www.fossil.energy.gov/news/techlines/2008/08030-CO2_Capture_Projects_Selected.html
24. http://my.barackobama.com/page/content/newenergy
25. http://thepage.time.com/obama-response-to-mccain-ad/
26. Comparing McCain, Obama energy plans, International Herald Tribune, http://www.iht.com/articles/ap/2008/08/09/america/Energy-Next-President-Highlights.php
27. Institute for 21st Century Energy, U.S. Chamber of Commerce, Washington D.C., http://www.energyxxi.org/NR/rdonlyres/eam4biljadknpedoyypgej2y2lf2df2y5mob4f5hyhzfs7ah577l26gskcrcphj5fy2dq4jaflz4ofushfcv2fwgwgb/PresidentialEnergyPositions20080618.pdf
28. http://www.johnmccain.com/Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
29. Institute for 21st Century Energy, U.S. Chamber of Commerce, Washington D.C., http://www.energyxxi.org/NR/rdonlyres/eam4biljadknpedoyypgej2y2lf2df2y5mob4f5hyhzfs7ah577l26gskcrcphj5fy2dq4jaflz4ofushfcv2fwgwgb/PresidentialEnergyPositions20080618.pdf
30. Offshore Energy & Minerals Management (OEMM), The Minerals Management Service, http://www.mms.gov/offshore/, July 7, 2008.
31. U.S. Geological Survey, http://pubs.usgs.gov/fs/fs-0028-01/
32. http://tonto.eia.doe.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_m.htm
33. http://www.usembassy.at/en/download/pdf/anwr_revenue.pdf
34. http://www.instituteforenergyresearch.org/2008/08/15/bogus-lease-claims-in-use-it-or-lose-it-proposal-stymie-real-energy-security/
35. http://my.barackobama.com/page/content/newenergy
36. http://www.johnmccain.com//Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
37. Energy Information Administration, Annual Energy Review 2007, http://www.eia.doe.gov/emeu/aer/contents.html.
38. Energy Information Administration, Annual Energy Outlook 2008, http://www.eia.doe.gov/oiaf/aeo/index.html
39. Energy Information Administration, Energy Market and Economic Impacts of S.2191, the Lieberman-Warner Climate Security Act of 2007, http://www.eia.doe.gov/oiaf/servicerpt/s2191/index.html, Environmental Protection Agency, EPA Analysis of the Lieberman-Warner Climate Security Act of 2008, http://www.epa.gov/climatechange/downloads/s2191_EPA_Analysis.pdf, and American Council for Capital Formation/National Association of Manufacturers Study of the Economic Impact of the Lieberman-Warner Climate Security Act, http://www.accf.org/nam.html.
40. Comparing McCain, Obama energy plans, International Herald Tribune, http://www.iht.com/articles/ap/2008/08/09/america/Energy-Next-President-Highlights.php
41. http://my.barackobama.com/page/content/newenergy
42. Comparing McCain, Obama energy plans, International Herald Tribune, http://www.iht.com/articles/ap/2008/08/09/america/Energy-Next-President-Highlights.php
43. http://my.barackobama.com/page/content/newenergy
44. http://www.johnmccain.com//Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
45. Interim Report on Crude Oil, Interagency Task Force on Commodity Markets, July 2008, http://www.cftc.gov/stellent/groups/public/@newsroom/documents/file/itfinterimreportoncrudeoil0708.pdf, and http://www.marketwatch.com/news/story/cftc-report-undercuts-claim-investors/story.aspx?guid={06B5DBFD-CC90-41A2-A3C0-6F18A3DBC03A}&dist=hppr
46. http://www.instituteforenergyresearch.org/wp-content/uploads/2008/06/oil_speculators.pdf
47. http://my.barackobama.com/page/content/newenergy
48. http://www.johnmccain.com//Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
49. See e.g., Sam Kazman, CAFE is Bad for Your Helath, Wall Street Journal (Nov. 13, 2005) http://cei.org/gencon/019,04970.cfm .
50. http://my.barackobama.com/page/content/newenergy
51. http://www.johnmccain.com//Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
52. Energy Information Administration, Analysis of the Climate Change Technology Initiative, April 1999, and Analysis of the Climate Change Technology Initiative: Fiscal Year 2001, April 2000.
53. http://my.barackobama.com/page/content/newenergy
54. http://www.johnmccain.com//Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
55. http://www.nreca.org/PublicPolicy/issuespotlight/20081013.htm
56. North American Electricity Reliability Council, 2007 Long-Term Reliability Assessment (Nov. 16, 2007) http://www.nerc.com/files/LTRA2007.pdf.
57. http://my.barackobama.com/page/content/newenergy
58. http://www.johnmccain.com//Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
59. http://my.barackobama.com/page/content/newenergy
60. http://www.johnmccain.com//Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
61. Energy Information Administration, Assumptions to the Annual Energy Outlook 2008, http://www.eia.doe.gov/oiaf/aeo/assumption/index.html
62. Energy Information Administration, Annual Energy Outlook 2007, http://www.eia.doe.gov/oiaf/archive/aeo07/index.html
63. Energy information Administration, Annual Energy Outlook 2008, http://www.eia.doe.gov/oiaf/aeo/index.html
64. Energy Information Administration, Assumptions to the Annual Energy Outlook 2008, http://www.eia.doe.gov/oiaf/aeo/assumption/index.html
65. http://web.worldbank.org/WBSITE/EXTERNAL/EXTSITETOOLS/0,,contentMDK:21845834~pagePK:98400~piPK:98424~theSitePK:95474,00.html
66. CNN, Riots, instability spread as food prices skyrocket, Apr. 14, 2008, http://www.cnn.com/2008/WORLD/americas/04/14/world.food.crisis/index.html?eref=rss_topstories.
67. CNN, Riots, instability spread as food prices skyrocket, Apr. 14, 2008, http://www.cnn.com/2008/WORLD/americas/04/14/world.food.crisis/index.html?eref=rss_topstories.
68. The Nature Conservancy, Climate Change and Energy: The True Cost of Biofuel, http://www.nature.org/initiatives/climatechange/features/art23819.html.
69. Mongabay.com, Why is oil palm replacing tropical rainforests?, http://news.mongabay.com/2006/0425-oil_palm.html.
70. http://my.barackobama.com/page/content/newenergy
71. http://www.johnmccain.com//Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
72. Energy Information Administration, Federal Financial Interventions and Subsidies in Energy Markets 2007, http://www.eia.doe.gov/oiaf/servicerpt/subsidy2/pdf/chap3.pdf
73. http://my.barackobama.com/page/content/newenergy
74. http://www.johnmccain.com//Informing/Issues/17671aa4-2fe8-4008-859f-0ef1468e96f4.htm
75. http://tonto.eia.doe.gov/dnav/pet/pet_move_impcus_a2_nus_ep00_im0_mbblpd_a.htm
76. http://www.instituteforenergyresearch.org/2008/07/16/who-benefits-from-federal-lease-hoarding/
77. See, for example, http://www.eenews.net/eenewspm/2008/10/17/2
78. http://www.instituteforenergyresearch.org/wp-content/uploads/2008/10/OCSacresleased.jpg, and http://www.instituteforenergyresearch.org/wp-content/uploads/2008/10/FederalLeaseOfferingsAcreageaLeased60-2006.pdf
79. http://www.eia.doe.gov/pub/oil_gas/natural_gas/data_publications/advanced_summary/current/adsum.pdf
80. http://my.barackobama.com/page/content/newenergy
81. http://www.johnmccain.com/Informing/Issues/da151a1c-733a-4dc1-9cd3-f9ca5caba1de.htm
82. Energy Information Administration, Energy Market and Economic Impacts of S.2191, the Lieberman-Warner Climate Security Act of 2007, http://www.eia.doe.gov/oiaf/servicerpt/s2191/index.html, Environmental Protection Agency, EPA Analysis of the Lieberman-Warner Climate Security Act of 2008, http://www.epa.gov/climatechange/downloads/s2191_EPA_Analysis.pdf, and American Council for Capital Formation/National Association of Manufacturers Study of the Economic Impact of the Lieberman-Warner Climate Security Act, http://www.accf.org/nam.html.
83. Energy Information Administration, International Energy Outlook 2007, http://www.eia.doe.gov/oiaf/archive/ieo07/index.html
84. See for example Chapter 8, “The Many Advantages of Carbon Taxes,” in the prepublication proofs of Yale economist William Nordhaus’ book, A Question of Balance: Weighing the Options on Global Warming Policies (New Haven: Yale University Press, 2008), available at: http://nordhaus.econ.yale.edu/Balance_2nd_proofs.pdf.
85. See IER’s critique of Nordhaus’ case at: http://www.instituteforenergyresearch.org/2008/06/05/ier-economist-murphy-takes-on-nordhaus-case-for-a-carbon-tax/.

The threshold test for EPA to move forward with this far-reaching regulation is whether carbon dioxide and other greenhouse gases “endanger human health and welfare.” The Bush Administration has not reached a conclusion on that question.

What are the likely outcomes if carbon dioxide is regulated under the Clean Air Act?

Regulating carbon dioxide means regulating the activities that emit carbon dioxide. In the United States, 85% of the energy we use comes from sources that emit carbon dioxide—coal, petroleum, and natural gas. Regulating these sources of energy will increase prices to consumers (e.g. electricity and gasoline)and reduce the economic efficiency of the economy, leading to job losses and large reductions in economic growth.

The Heritage Foundation’s Center for Data Analysis has estimated the economic impacts of carbon dioxide regulation, finding that regulating carbon dioxide using the Clean Air Act would:

• Reduce aggregate gross domestic product by $6.9 trillion by 2029.
• Reduce employment in the manufacturing sector by 2.9 million jobs by 2029.
• Reduce employment in:
  • Mining by 7.4%;
  • Transportation and warehousing by 17%;
  • Durable manufacturing by 28%;
  • Textile mills by 28%;
  • Paper and paper products by 36%;
  • Plastics and rubber products by 54%;
  • Machinery manufacturing by 57%.

As the Center notes, “The study measures only the likely impacts through 2029, at which point CO2 will have been cut by 31% below the 2005 level. The ultimate CO2 reduction target will likely exceed 70% by 2050.”

Over a million businesses will need to get carbon dioxide emission permits from EPA.

Regulating carbon dioxide through the Clean Air Act means many businesses will need to pay for new permits just to stay in business. According to the Department of Agriculture,[2] the following farms will need to get permits under Title V of the Clean Air Act:

• Dairy facilities with over 25 cows
• Beef operations with over 50 head of cattle
• Swine operations with more than 200 hogs
• Farms with more than 500 acres of corn

The process of getting permits under the Clean Air Act from EPA is long and costly. The Department of Agriculture states “these operations simply could not bear the regulatory compliance costs that would be involved.”[3]

Farms aren’t the only businesses that will be forced to obtain permits from EPA—over 1.2 million buildings will needs to get carbon dioxide permits. Here are some of the businesses that will be required to get permits:

• 1 million mid-sized to large buildings
  • 10% of all churches,
  • 20% of all food service buildings
  • 50% of the buildings used by the lodging industry
  • 92,000 health care facilities (ie. hospitals)
• 200,000 manufacturing operations
• 20,000 large farms

These are just a few of the likely outcomes of the EPA’s current plans. But there will be many more—the proposed regulation and supporting documents already span 18,000 pages. And that’s just for the advance notice of proposed rulemaking, not the actual rules.

One last note—even if EPA implemented these plans, they will not result in a change in global warming. The vast majority of future greenhouse gas emission will come from developing countries like China, India, and the Middle East. As a result, reductions in U.S. emissions are likely to have little impact on global emissions. If the U.S. were to eliminate all carbon dioxide emissions by 2030, world-wide carbon dioxide emissions would still increase by about 30 percent.

Under the Clean Air Act, 73 Fed. Reg. 44,354 (July 30, 2008).

[2] Department of Agriculture, Comments on EPA’s Advance Notice of Proposed Rulemaking on Regulating Greenhouse Gases Under the Clean Air Act, 73 Fed. Reg. 44,354, 44,377 (July 30, 2008).

[3] Id.