Analysis of Obama's Plan to Save the World From Greenhouse Gasses

By executive order, president Obama has acted to cut greenhouse gas emissions in the US, allegedly to halt global warming.  However, greenhouse gas production is a global thing so it's important to consider global ramifications of US policy decisions.

Starting with Europe's carbon cap-and-trade, let's take a look at global events and policies to see if Obama's plan has any chance of success.

Collapse of Carbon Price Trading

Europe's cap-and-trade effort is in crisis as a Collapse in EU Carbon Price has rendered the program useless.

The EU Emissions Trading Scheme is in crisis. Yesterday, the European Parliament voted against the backloading proposal which was aimed at increasing the price of carbon permits. After the vote, the price of carbon permits dropped by about 40% to its lowest ever price of €2.63. New Energy Finance predicts that it might fall as low as €1.

Mark Whitaker (BBC): Today, European MPs vote no to a plan to boost the idea of carbon trading as the weapon to combat climate change.

Tamra Gilbertson (Carbon Trade Watch): Perhaps this can be a signal to the rest of the world that emissions trading and market-based solutions are not the solution to climate change.

Mark Whitaker: Not everyone is convinced it actually works, but the cornerstone of Europe’s effort to combat climate change is something called carbon trading, which works on the idea that companies are allowed to buy permits to cover any carbon emissions they make. It’s based on the principle that the polluter pays.

The trouble is, the price of carbon permits has dropped so low that there was scarcely any deterrent at all to pumping out carbon.

Today, the European Parliament voted not to intervene in the carbon permit market to prop up the price of the permits. MEPs had been invited to vote for something called backloading, that’s a plan to delay the issue of any more permits in order to boost the price. It was an invitation that they declined.

Australia Plans to Scrap Carbon Tax

Bloomberg reports Australia’s Abbott Revives Proposal to Scrap Carbon-Price Levy

Australia will re-introduce a bill to repeal a carbon-price mechanism brought in by the previous Labor government ahead of a power shift in the Senate, which has previously rejected the levy’s removal.

Prime Minister Tony Abbott’s government will take the proposed legislation to parliament today, according to an e-mailed statement from his office yesterday. The plan to scrap the levy has been stalled by opposition lawmakers in the Senate, which has the power to block and amend legislation.

The make-up of the upper house will change from July 1 when the Palmer United Party -- led by Clive Palmer -- will hold the balance of power, meaning Abbott will have to negotiate with the mining magnate to pass laws. The government has said that repealing the carbon price will still allow the world’s 12th-largest economy to meet its promised 5 percent reduction in emissions by 2020.

“Scrapping the carbon tax is a vital part of this government’s economic action strategy because the carbon tax is bad for jobs, it hurts families and it doesn’t help the environment,” Abbott said in the statement. “We’ll save the typical household about A$550 ($516) a year.”

"Obama-Air" Forges On Alone

In spite of the fact that clean energy schemes are expensive, have been riddled with fraud, and don't work, Obama has decided to carry the global carbon torch alone.

The New York Times reports Using Executive Powers, Obama Begins His Last Big Push on Climate Policy.

Curiously, and as with Obama-Care (Romney-Care) the roots of Obama-Air are from Romney-Air. The Times explains.

In his first term Mr. Obama tried to push a cap-and-trade bill through Congress, but it died in the Senate in 2010. Republicans, Tea Party groups and the coal industry attacked Democrats who supported it, criticizing the legislation as a “cap and tax” that would raise energy prices. Cap and trade is now seen as political poison in Washington. But Republicans said that the new rule has created a back door for Mr. Obama to force through a politically inflammatory policy by reviving it in the states. “This E.P.A. regulation will breathe life into state-level cap-and-trade programs,” said Peter Shattuck, director of market initiatives at ENE, a Boston-based climate policy advocacy and research organization.

Many states are already researching how to join or replicate the nation’s two existing state-level cap-and-trade plans, both of which bear the signatures of prominent Republicans: Mitt Romney, the 2012 presidential nominee and former Massachusetts governor, and Arnold Schwarzenegger, the former California governor.

As governor of Massachusetts, Mr. Romney was a key architect of a cap-and-trade program in nine northeastern states, the Regional Greenhouse Gas Initiative. He worked closely at the time with a top Massachusetts environmental official, Gina McCarthy, who today is immersed in the Obama administration’s new rule as the administrator of the E.P.A. Mr. Romney later disavowed the regional cap-and-trade program.

Cap and trade was born in 1990 during the administration of President George Bush as a centerpiece of amendments to the 1970 Clean Air Act. Conceived as a business-friendly way to cut pollution without heavy-handed regulation, the idea was that the cap would ratchet down each year, allowing less pollution while market forces drive up the price of permits, creating an incentive for industries to invest in lower-polluting sources of energy. In 2006 in California, Mr. Schwarzenegger signed a pioneering state cap-and-trade law. As the Republican presidential nominee in 2008, Senator John McCain of Arizona pledged to put in effect a nationwide cap-and-trade law.  

Officials with the northeastern regional cap-and-trade program that Mr. Romney initially endorsed have played a significant role in shaping the new rule.

EPA Clean Power Proposal

Inquiring minds digging into the EPA's Clean Power Plan Proposed Rule will discover ridiculous hype about global warming.

Our climate is changing, and we’re feeling the dangerous and costly effects right now.

• Average temperatures have risen in most states since 1901, with seven of the top 10 warmest years on record occurring since 1998.
• Climate and weather disasters in 2012 cost the American economy more than $100 billion.

Carbon Tax - A Bad Idea

With the EU Emission Trading Scheme (ETS) struggling and “carbon credit frauds” in the news, many analysts argue we should get rid of carbon trading and opt for carbon taxes instead. But according to Alex Trembath and Matthew Step, carbon taxes will do nothing to cut emissions because they don’t lead to innovation. “Steve Jobs didn’t develop the PC because the price of typewriters went up.”

Energy Post authors Alex Trembath and Matthew Step explain Why a Carbon Tax is a Bad Idea.

Economists’ attraction to a carbon tax was on full display recently when economist Greg Mankiw wrote in the New York Times, calling a carbon tax a climate policy “America could live with,” compared to the grab bag of regulations and fuel standards targeted by the Obama administration.

Carbon tax supporters believe it will lead consumers to use less dirty energy. Mankiw writes, “When making everyday decisions, people would naturally look at the prices they face and, in effect, take into account the global impact of their choices.”

Mankiw’s preferred climate solution aims at getting U.S. consumers to buy slightly more fuel efficient cars or turn off light bulbs more regularly because energy prices are modestly higher. This will have little impact on global emissions because virtually all their growth will be in rapidly growing developing nations like China and India.

The only way to get to dramatic cuts in global emissions is by developing significantly cheaper and better clean energy technologies. Current clean energy alternatives cost significantly more than conventional energy. Expecting consumers and businesses, especially in poor developing nations, to pay a large price premium for clean energy is wishful thinking.

Economists have built a cottage industry out of comparing carbon taxes, cap-and-trade, and conventional pollution regulations. But an innovation strategy to develop cheaper, better clean energy technologies doesn’t make the cut. Frankly, this shouldn’t be a surprise as innovation is not part of neoclassical economists’ lexicon. In Mankiw’s seminal textbook Principles of Economics, the word “innovation” is barely mentioned in almost 900 pages of text.

But breakthrough technologies like jet aircraft, gas engines, computers and cell phones have never emerged because their competitors’ price increased. Steve Jobs didn’t develop the PC because the price of a typewriter went up.

Government Not the Answer

Unfortunately, Trembath and Step miss the boat as well, siding with innovation economist Mariana Mazzucato who recently opined, “A quick look at the pioneering technologies of the past century points to the state, not the private sector, as the most decisive player in the game.”

"In other words, smart government innovation policy that works with industry is how the world will get cheap clean energy," say Trembath and Step.

For starters, the idea that manmade global warming is the reason "seven of the top 10 warmest years on record occurred since 1998" is debatable, if not outright laughable.

More to the point, the idea Obama can do anything sensible to save the world from global warming in a timely manner, even if it were true, is genuinely ridiculous.

A history of Obama's backing of energy programs riddled with fraud, waste, and eventual collapse is proof enough. Government nearly always backs the worst ideas, requiring the most subsidies, while better technologies are delayed or die on the vine.

Kyoto Treaty Exemptions

Please recall that China and India are Exempt from Kyoto standards. The US opted out because China was not a party.

Canada signed the treaty but in 2012 Canada Leaves Kyoto Protocol, Lets China Buy Into Oil Sands: "Canada’s withdrawal from the Kyoto Protocol took legal effect on Saturday, December 15. Canada is the only nation out of more than 180 to legally exit the treaty that governs greenhouse gas emissions."

China's Soaring Coal Consumption

A 2013 article in the Scientific American discusses China's Soaring Coal Consumption.

In a simple but striking chart published on its website, the U.S. Energy Information Administration plotted China's progress as the world's dominant coal-consuming country, shooting past rival economies like the United States, India and Russia as well as regional powers such as Japan and South Korea.



According to EIA, the 325-million-ton increase in Chinese coal consumption in 2011 accounted for 87 percent of the entire world's growth for the year, which was estimated at 374 million tons. Since 2000, China has accounted for 82 percent of the world's coal demand growth, with a 2.3-billion-ton surge, the agency said.

"China now accounts for 47 percent of global coal consumption -- almost as much as the rest of the world combined," EIA said of the latest figures.

The rising consumption numbers reflect a 200-plus percent increase in Chinese electricity generation since 2000, with most of the new power coming from coal-fired power plants. Chinese growth averaged 9 percent per year from 2000 to 2010, more than twice the 4 percent global growth rate for coal consumption. And when China is excluded from the tally, growth in coal use averaged only 1 percent for the rest of the world over the 2000-2010 period, according to EIA.

U.S. Coal Exports Contribute

Although Chinese coal is largely sourced from domestic mines, EIA figures show that U.S. coal shipments to China have dramatically risen in recent years, punctuated by a 107 percent jump from 2011 to 2012. Chinese imports of U.S. coal surged from 4 million tons in 2011 to 8.3 million tons last year, according to the agency. Only Argentina and Austria saw larger percentage increases in U.S. coal shipments, but on much smaller volumes.

Europe Fires up More Coal

Ironically, and as a direct result of US targeting coal, the price of coal has plunged. US coal emissions may go down, but as we have seen above, China usage is on a rampage.

What about Europe?

Please consider the February 2014 Financial Times report Shell Hits Out at Brussels Energy Policy.

Royal Dutch Shell has launched a broadside against what it says is a “European energy crisis” that could drive a raft of new coal power plants across the continent at the expense of cleaner alternatives such as gas.

Policy confusion in Brussels means as much as 11 gigawatts of coal-fired generating capacity could come on line in Europe over the next four years, according to the company, one of the world’s largest natural gas producers.

That would be equal to around a dozen coal plants and it could lead to a situation where coal was locked in as an energy source even though gas is much cleaner to burn, said Dick Benschop, Shell’s head of gas market development.

The US shale boom has made natural gas cheaper in that country, triggering an influx of cheap American coal to Europe that has helped make gas plants less economically viable.

Shell says Germany’s coal imports rose more than 7 per cent to nearly 44m tonnes in 2013 from a year earlier and the UK saw a similar rise, while carbon dioxide emissions in both countries increased in 2012.

At the same time, large EU utilities estimate at least 30 gigawatts of gas-fired power generating capacity has been mothballed around Europe.

Obama's Plan to Save the World

Europe was mothballing natural gas and importing US coal even before the crisis in Ukraine. Think Europe is going to burn less coal now?

Such is the silliness of cap-and-trade, uneconomical government forays into wind and solar energy, and policies that consume energy (shipping US coal thousands of miles to China and Europe) so they can burn it there, because we cannot burn it here.

The notion Obama is going to save the world from greenhouse gasses and rising temperatures via US government policy to burn less coal and be more fuel efficient here is clearly absurd.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com