Tag: "climate"

Economic Consequences of Climate Change Policies

According to The Growing Benefits of a Warmer World by the NCPA, global warming has many tangible benefits to the economy. Supplementing the argument, many negative economic consequences exist from climate change policy. Thus, a two-fold offensive argument exists: global warming helps the economy and policies to curb warming hurt the economy.

A study conducted by the Heritage Foundation found that carbon policies with very lofty targets and goals, such as the Waxman-Markey legislation (an 80 percent cut in CO2 emissions by 2050) passed by the House of Representatives in 2009, would have long-term detrimental economic effects:

  • An aggregate income loss to the U.S. of $207.8 trillion by 2100.
  • An aggregate income loss worldwide of $109.6 trillion by 2100.
  • A one-year worldwide loss of $3.5 trillion in 2100, equivalent to 4.75 percent of U.S. Gross Domestic Product.
  • Adverse impacts, on net, in every year of implementation.

Even more startling, these numbers assume that the U.S. is the only country to enact a carbon policy. The numbers skyrocket when including the rest of the world implementing similar policies. As such, while these policies may address environmental degradation, the negative economic effects greatly outweigh the positive results in all aspects of the “cost-benefit analysis.” In fact, having a stronger economy will help society to overcome the negative effects of climate change. Stronger economies have much easier accessibility to and flexibility with adaptation strategies.

Additionally, taken from a report by the Council on Foreign Relations,

Lawmakers and industry leaders worry that such greenhouse-gas caps in the United States will reduce the ability of U.S. companies to compete with foreign imports, leading U.S. companies to move to countries without greenhouse-gas restrictions, which is often termed ‘leakage’.

This same report offers many solutions to these qualms, but concludes that attempts to offset economic harm would pose a number of hurdles. While the end of this report also suggests economic benefits for these policies, the increased cost of domestic energy offsets any potential benefits.

Thus, instead of having the federal government apply more regulations and issue further policies to curb carbon emissions, the United States should encourage more private sector development to adapt to and mitigate the effects of impending climate change.

The U.S. should actually follow the example set forth by the United Nations via its Private Sector Initiative. By allowing for a unified database of case studies, companies all over the world can view actions implemented by other companies to reduce risks to their business operations. Many of these case studies also offer strategies for investing in adaptation action in vulnerable regions in a sustainable and profitable manner. This model for preventative and adaptive action is exactly what the U.S. should follow, as it filters and disperses innovative ideas throughout the private sector at a time when the federal government remains inefficient in addressing these issues.

Tanner Davis is a research associate at the National Center for Policy Analysis.

Profiling Environmentalism

Since 97% of climate scientists believe that global warming results from human activity, targeting the human causes of environmental degradation, such as pollution, CO2 emissions, resource depletion, etc. will be very effective at curbing the threats of global warming and climate change. In approaching an issue of the environment, a policymaker must think about the three main schools of thought on the spectrum of environmentalism: light, dark, and bright green. These three types of environmentalism provide the framework under which policy action will occur.

Light Green

Light green environmentalism targets consumer behavior, encouraging individuals to make incremental changes in their daily lives to reduce harm to the environment. Examples include reusing your own bags when shopping for groceries, recycling, turning the faucet off when brushing teeth, buying LED certified electronics, etc. This framework has clearly been the foundation for the sustainability movement; however, the lack of urgency for change has instilled fatigue and indifference.

Dark Green

Of the three perspectives, dark green environmentalism has the most pessimistic view of modern society, believing that industrialization, manufacturing, and development have solely negative consequences for the environment. Unlike light greens, this shade targets the community level, emphasizing the need to become self-sufficient, free from technological advancement. However, in a world where modernization and industrialization seem to be the norm, rejecting this trend appears economically regressive, since urbanization/industrialization encourages economic growth.

Bright Green

This term is the most recent of the three, coined in 2003 by Alex Steffen. Unlike light and dark, bright greens emphasize the use of technology to solve the environmental issues. As Steffen states in a more recent post, this perspective calls for “innovation, design, urban revitalization, and entrepreneurial zeal.” Bright greens believe in using green technology that will not harm the environment but will continue the trend of modernization to serve common interests. Clearly, bright green environmentalism combines the best of both worlds — environmentalism and economic development via modernization.

Which framework best serves the interests of the U.S.?

After examining these three frameworks, the United States should operate with the bright green mindset, as it provides not only ecological but economic benefits. Since bright green environmentalism embraces technological innovation, this framework encourages more development in order to solve the environment problem. As such, this framework achieves common goals in modern U.S. society: reducing environmental degradation and maximizing economic production. Even more, embracing this ideology could bring the U.S. out of its more recent economic slump. While bright green environmentalism serves the most effective purpose in modern society, which one do you think is the most effective? Which perspective do you most align with?

Tanner Davis is a research associate at the National Center for Policy Analysis.

An All-of-the-Above* Energy Policy

Policymakers frequently tout their support for an all-of-the-above approach to energy generation, yet somehow nuclear energy largely seems to disappear from that conversation in any meaningful way. And many environmentalists — who castigate coal, insisting that we need clean, renewable energy — flatly ignore nuclear power, despite its zero carbon dioxide emissions. Instead, they hold up wind and solar and biofuels — none of which are ready for primetime — as the solution to our nation’s energy problems. Yet, nuclear power is one clean energy source that actually has the ability to provide affordable, reliable energy on a large-scale basis.

Knowing just how much sense nuclear energy makes, it is frustrating to listen to conversations and debates over energy generation that either flatly ignore nuclear power or dismiss it as unsafe. (For some articles that debunk some of the myths and fears surrounding nuclear power, see here and here.) Cutting down on carbon emissions is apparently the premier goal of many unless doing so would mean using nuclear power – something actually effective and affordable.

But last week, Forbes ran an interesting piece by former EPA Administrator Carol Browner. Browner was Administrator of the EPA under President Clinton and served as director of President Obama’s Office of Energy and Climate Change Policy.

Her commentary immediately addressed that frustrating contradiction that exists among many who oppose nuclear energy:

“I used to be anti-nuclear.  But, several years ago I had to reevaluate my thinking because if you agree with the world’s leading climate scientists that global warming is real and must be addressed immediately then you cannot simply oppose clean, low-carbon energy sources.”

Browner notes that “[e]xisting nuclear power plants…emit virtually no carbon pollution and are among the cleanest sources of electricity available.”

If climate change activists are serious in their belief that man is responsible for global warming, then you would expect more of them to rally behind nuclear as an energy source. Unfortunately, an “all-of-the-above” approach sounds nice, but it’s often just a catchphrase that doesn’t necessarily represent a comprehensive energy policy.

(And of course, nuclear power isn’t the only casualty of the “all-of-the-above” refrain: President Obama claims an all-of-the-above approach to energy, yet apparently that does not include support for coal power or the Keystone XL pipeline…)

Smart Growth: Destroying Housing Opportunity from California to Australia (and Beyond)

Two recent stories provide further  evidence on the extent to which urban containment policies (also called smart growth, growth management, compact city policy, livability and urban consolidation) raises house prices relative to incomes, thereby reducing housing affordability. Because housing represents the largest element of household budgets (not transportation as a US government website implies), urban containment policy reduces discretionary income — the money households have left over after taxes and paying for necessities. This leads to a lower standard of living and more poverty, and violates the fundamental purposes of urban planning, described by former World Bank principal planner Alain Bertaud as:

“Increasing mobility and affordability are the two main objectives of urban planning. These two objectives are directly related to the overall goal of maximizing the size of a city’s labor market, and therefore, its economic prosperity.”

Two recent stories describe the effects of urban containment policy on the standard of living:

The Economist and Urban Containment “Fat Cats”

“Free Exchange” in The Economist came  down strongly on the side of economics in a review of housing affordability.

According to The Economist, the unusually high cost of housing in San Francisco (and other places) is principally the result of tight land use regulation, which makes it expensive or impossible to build. If “local regulations did not do much to discourage creation of new housing supply, then the market for San Francisco would be pretty competitive.” Add to that Vancouver, Sydney, Melbourne, Toronto, Portland and a host of additional metropolitan areas, where urban containment policy has driven house prices well above the 3.0 median multiple indicated by historic market fundamentals.

The Economist explains the issue in greater detail: “We therefore get highly restrictive building regulations. Tight supply limits mean that the gap between the marginal cost of a unit of San Francisco and the value to the marginal resident of San Francisco (and the market price of the unit) is enormous. That difference is pocketed by the rent-seeking NIMBYs of San Francisco. However altruistic they perceive their mission to be, the result is similar to what you’d get if fat cat industrialists lobbied the government to drive their competition out of business.” (Our emphasis).

Of course urban planning interests have long denied that that rationing land is associated with higher housing prices (read greater poverty and a lower standard of living). Nonetheless urban containment policies not only drive up the price of land, but do so even as they reduce the amount of land used for each new residence, driving prices per square foot of land up as well.

The Economist notes that unless the direction is changed, housing policy will continue to be “an instrument of oligarchy. Who knows. But however one imagines this playing out, we should be clear about what is happening, and what its effects have been.”

Land Prices Skyrocket as Residential Lot Sizes Fall in Australia

The extent to which smart growth policy (urban continament policy or urban consolidation policy) is associated with higher land (and house) prices is illustrated by a recent press release from RP Data in Australia. The analysis examined the vacant building lot prices for the period of 1993 to 2013.

During the period, the median price of a vacant lot rose 168 percent after adjustment for inflation.This is nearly 5 times the increase in the median household incomes of the seven largest capital cities (Sydney, Melbourne, Brisbane, Perth, Adelaide, Canberra and Sydney).

But it gets worse. The median lot size was reduced nearly 30 percent. This should put paid to the myth that urban containment reduces lot prices as it reduces their sizes. The same dynamic has been indicated in the United States.

Australia has been plagued by huge house cost increases relative to incomes in association with urban containment policy. Before the adoption of urban containment policy, it was typical for house prices to average three times or less than that of household income. Now, Sydney has the highest median multiple (median house price divided by median household income) of any major metropolitan area in the New World, with the exceptions of Vancouver and San Francisco. Melbourne, the second largest metropolitan area in Australia, has a median multiple of 8.4, making it fifth most costly in the New World, behind San Jose. All of Australia’s major metropolitan areas are “severely unaffordable,” including slow-growing Adelaide (6.3), as well as most smaller areas.

Getting Priorities Right

Research on these impacts led London School of Economics professor Paul Cheshire to conclude that urban containment policy is irreconcilable with housing affordability. This means that urban containment policy is irreconcilable with a better economic future for households, including those in poverty.

The purposes of urban containment policy are largely driven by a particular vision of the urban form and a manifestly wrongheaded belief that rationing land and limiting mobility can contribute materially to reducing greenhouse gas emissions. The issue is neither urban design nor the expensive and ineffective strategies of urban containment. People are more important — their standard of living and reducing the number living in poverty. There is a compelling need to reorient urban policy in this direction (see Toward More Prosperous Cities).

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For a complete listing of median multiples by major metropolitan area, see the 10th Annual Demographia International Housing Affordability Survey.

Additional information on the RP Data research is available at Australian Property Through Foreign Eyes

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Note: This article is adapted from contributions by the author to the newgeography.com

Government Subsides Help Distort Science

A $500,000 study released this past Sunday in the peer-reviewed journal, Nature Climate Change, detailed how corn-based biofuels release seven percent more greenhouse gases in the initial five-year time frame compared with conventional gasoline. The study which was paid for by the federal government found that regardless of how much corn residue is taken off the field, the process contributes to global warming.

But administration officials who have devoted more than a billion dollars of taxpayer funds as well as the biofuel industry disagree. DuPont claims that the ethanol it will produce will be 100 percent better than gasoline in terms of greenhouse gas emissions. The Environmental Protection Agency (EPA) says the study “does not provide useful information relevant to the life cycle greenhouse gas emissions from corn stover ethanol”.

But there are reasons to doubt DuPont and the EPA. DuPont is getting billions in subsidies to produce biofuels. Federal subsidies help its stock price; the company would be foolish if it did not defend biofuels. Meanwhile an Associated Press investigation last year found that the EPA’s analysis of corn-based ethanol failed to accurately predict the environmental consequences. California regulators earlier declared that corn ethanol would not reduce global warming and may in fact make it worse. Other federal studies have reached the same conclusion. David Tillman, a researcher at the University of Minnesota who has researched biofuels emissions from the farm to the tailpipe, says the recent study is the best he has seen on the issue.

This controversy highlights several problems. Despite claims to the contrary, politics seem to play a part at the EPA. The EPA could have simply released a statement that research in this area is still developing and it is sticking with its initial conclusion that biofuels improve the environment. By issuing such a strong rebuke, it seems the organization is not open to new information. Real scientists know new discoveries come along all the time. Scientists do not offer blanket statements, but politicians do.

Further, no matter how well intentioned, subsidies distort the market. Reducing carbon emissions is a good goal, but when government picks a winner everybody else loses. We do not know if there is a better solution that corn-based ethanol. We do not know if the EPA is investing in real science or attaching itself to its preferred winner. The EPA’s role should be to judge the best solution the private sector develops. When the EPA provides subsidies to one technology over another, taxpayer money and possibly scientific integrity are lost forever.

Emiminate Insurers of Last Resort

The reaction to Superstorm Sandy’s $65 billion in damage has been the predictable doom and gloom about climate change and rising sea levels. But instead of implementing draconian restrictions, we can prevent loss of life and property by eliminating insurance of last resort.

Extreme weather is nothing new. Paris was flooded on a regular basis by the Seine River until Napoleon III built walls for flood prevention. But while it was logical for earlier generations to live on higher ground away from major bodies of water, it now seems logical to us to build as close to the ocean as possible. Boston, New York City and much of the population in the state of Florida is flood prone. Between 1970 and 2000, East Coast areas grew in population. When four hurricanes hit Florida in 2004 and Superstorm Sandy hit the northeast in 2012, many people incurred major property losses.

Insurance companies made poor decisions to cover some of these properties. But most companies have adjusted their portfolio. Yet instead of letting the market work and forcing folks who rebuild homes on barrier islands to go without coverage, many states stepped into the game by providing insurance of last resort. Premiums for these policies are offered below market rate with taxpayers subsidizing the difference. For example in Miami-Dade County, FL the insurance premium on a $150,000 house with Citizens (the Florida insurer of last resort) costs $4,600. With a traditional insurance company the premium is $10,000. Worse, some states actually encouraged the private sector to dump questionable policies into the last resort pool.

If private insurers cannot provide insurance to certain coastal location, this is a signal that building a home in this location is a poor decision. And if one of these homes is going to get damaged by the next storm, it is not a good policy decision to encourage folks to live there. If the private sector cannot provide insurance to folks building new homes, the government should not provide it either. Current homeowners can be transferred over time to the private market, assuming they do not get hit by multiple storms. Potential owners can still build in hurricane prone areas, but taxpayers should not bail them out when the inevitable next storm strikes.

Global “Clean” Energy Expenditures are Down (and Respect for Economic Realities are Up) in 2013

It is refreshing to see that environmentalists and liberal governments are beginning to recognize the economic realities they face when manipulating energy markets to promote clean, renewable energy sources. For example, a recent Time Magazine article investigates why total public and private funding of “clean power” from the global renewable energy industry fell 14% in 2013. This amounts to a decline of 23% since the peak of such spending occurred in 2011. The data cited came from a study from the Frankfurt School-UNEP and Bloomberg New Energy Finance.

This study points out that Europe decreased its spending on clean, renewable energy sources by 44% while the U.S. decreased it is spending by 10%. These reductions were found to largely arise from three economic realities:

  • The declining costs of producing “clean” energy.
  • The significant reduction in public subsidies.
  • Increased competition from renewable but “unclean” biofuels power sources.

Economic Reality #1: Subsidizing an activity can drive down the unit cost of production by creating economies of scale. For example, the average cost for installing a voltaic solar cell in the U.S. declined 60% in the last few years. Indeed, despite the reductions in total spending in 2013, global clean energy capacity in 2013 (from renewable energy sources other than existing hydroelectric power sources) had remained the same as it was in 2012. However…

Economic Reality #2: Public sector funding sources are scarce. As Europe is slowly recovering from the recent global recession, the central governments of these countries are finding it very difficult to justify costly public investments in clean energy subsidies when other popular social programs compete for survival in an environment of shrinking public sector budgets. In fact, Spain and Bulgaria made their subsidy cuts retroactive, shuttering their clean energy industries, despite the falling unit costs of providing clean energy. Further…

Economic Reality #3: Every choice has an opportunity cost that cannot be avoided.  Clean power is defined as coming from renewable, sustainable fuel sources that create very low or no pollution or greenhouse gas emissions. Environmental scientists are beginning to realize that subsidized biofuel production:

  • Pushes up global food prices, because the fuel is grown with water sources and lands that could be used for growing food, which increases food prices and makes biofuels less “sustainable”.
  • Increases water pollution levels from pesticides and insecticides, making biofuels “unclean.” Indeed, an article in the magazine Scientific American notes that, “U.N. Intergovernmental Panel on Climate Change has for the first time acknowledged the risks of uncontrolled biofuels development.”

We seem to be living in a world where national governments are intent on accelerating our adoption of clean energy sources along a time line not supported by private energy markets. At least it is refreshing to see that both governments and environmentalists are slowly (if only involuntarily) admitting to economic reality: the true scarcity of valuable resources in our world creates real and unavoidable influences on the efficacy of government policies designed to accelerate clean energy industry development. We cannot simply wave the magic wand of “hope” to force the hand of the market in a manner that ignores such economic realities.

New IPCC Report: Death and Destruction!

The IPCC’s latest report (Climate Change 2014: Impacts, Adaptation, and Vulnerability) and it’s full of observations and predictions of calamity is now available.

Just a scan of the news headlines reveals the catastrophe once again forecast by the IPCC: Climate change to leave no one on planet ‘untouched,’ IPCC chief, New Climate Change Report Warns of Dire Consequences, New U.N. Report: Climate Change Risks Destabilizing Human Society, Climate change a threat to security, food and humankind – IPCC report, Panel’s Warning on Climate Risk: Worst Is Yet to Come.

Ahh!

The IPCC may be full of gloom and doom, but not everyone is on board. Joseph Bast over at Forbes looked at the 8 main risks in the report that the IPCC listed as “reasons for concern.” He puts them alongside conclusions from the Nongovernmental International Panel on Climate Change (NIPCC). Founded by atmospheric physicist Fred Singer, the NIPCC’s scientists assess global warming science and conduct independent reviews of the IPCC reports.

Just a few examples of the differences between the IPCC and NIPCC reports:

  • Food insecurity? Yes, says the IPCC. Little or no risk, says the NIPCC.
  • Severe harm for urban populations due to flooding? Yes, says the IPCC. No, says the NIPCC.
  • Systemic risks due to extreme weather events? Yes, says the IPCC. There is no support that precipitation in a warmer world becomes more variable and intense, says the NIPCC.
  • Risk of mortality, morbidity, and other harms? Yes, says the IPCC. No, says the NIPCC: Modest warming will actually result in a net reduction of human mortality.

The NIPCC reports are peer-reviewed, produced by scientists from 20 countries around the world, and cite thousands of peer-reviewed studies. The latest report is over 1,000 pages, and anyone can go online and view them.

Bast asks,

So is man-made global warming a crisis? Don’t just wonder about it, understand it yourself. Read one or a few chapters of one of the NIPCC reports, and ask if what you read is logical, factual, and relevant to the debate. See if the UN or its many apologists take into account the science and evidence NIPCC summarizes, and then decides whether its predictions ‘of death, injury, and disrupted livelihoods’ is science or fiction.

Matt Ridley over at the Wall Street Journal notes that the IPCC report predicts 70 percent more warming by the end of this century than the best science actually suggests. He then asks — what distinguishes the global warming “crisis” from the other crises we’ve been warned about in the past?

There remains a risk that the latest science is wrong and rapid warming will occur with disastrous consequences. And if renewable energy had proved by now to be cheap, clean and thrifty in its use of land, then we would be right to address that small risk of a large catastrophe by rushing to replace fossil fuels with first-generation wind, solar and bioenergy. But since these forms of energy have proved expensive, environmentally damaging and land-hungry, it appears that in our efforts to combat warming we may have been taking the economic equivalent of chemotherapy for a cold.

Almost every global environmental scare of the past half century proved exaggerated including the population “bomb,” pesticides, acid rain, the ozone hole, falling sperm counts, genetically engineered crops and killer bees. In every case, institutional scientists gained a lot of funding from the scare and then quietly converged on the view that the problem was much more moderate than the extreme voices had argued. Global warming is no different.

Are we really willing to transform our economies based on reports derived from faulty, ill-constructed models? Unless more people delve into these IPCC reports and look at the evidence presented by the NIPCC and others, we’re likely to do just that.

The Growing Benefits of a Warmer World

Global warming has stalled for the last 16 years, but the warming that has occurred over the last 150 years — despite what is commonly believed — has actually been beneficial. In fact, the earth should continue to see benefits from warming for the foreseeable future, says H. Sterling Burnett, a former senior fellow with the National Center for Policy Analysis.

A study by economist Richard Tol found that until 2080, and potentially beyond that, a warming trend would have a positive impact on the world’s economy. Over the last 150 years, the globe has warmed an average 0.8 degrees Celsius. An additional 2.2 degree rise in temperature would continue to yield substantial benefits.

Climate change over the last century has added 1.4 percent to global economic output, Tol found. By 2025, that figure should reach 1.5 percent of gross domestic product (GDP).

Increases in carbon dioxide (CO2) have added 0.8 percent to GDP because of the boost to agriculture. Similarly, the temperature increase has reduced the demand for heating, adding 0.4 percent to GDP.

With higher CO2 levels, plants thrive and become more efficient in their use of water. And because most of the warming has reduced low nighttime temperatures, the globe has seen fewer growth-stunting frost events, as well as longer growing seasons.

  • Agronomist Craig Idso determined that a 300 parts per million rise in CO2 increases plant biomass 25 percent to 55 percent.
  • From 1961 to 2011, the annual value of improved plant growth grew from $18.5 billion to more than $140 billion, amounting to a total of $3.2 trillion.
  • From today to 2050, Idso determined that increases in CO2 will result in $9.8 trillion in additional crop production.
  • Notably, it is Africa that is benefiting largely from improved agricultural production.

Growing faster than all other continents, one-third of African countries are growing at 6 percent per year. And from 2005 to today, the amount of people living below the poverty line has fallen from 51 percent to 39 percent.

African farmers are replacing crops introduced by colonial governments with traditional crops that grow best in warm, dry conditions. In sub-Saharan Africa, the growth of agricultural GDP increased from 2.3 percent per year in the 1980s to 3.8 percent each year from 2000 to 2005.

Food production is actually outpacing population growth in Uganda and the 15 countries of West Africa.The poverty rate in Ghana has fallen in half, while farm output has increased 5 percent every year for the last two decades. Even Ethiopia and Malawi are growing record amounts of crops and exporting surpluses.

Source: H. Sterling Burnett, “The Growing Benefits of a Warmer World,” National Center for Policy Analysis, March 18, 2014.

Climate Change Talkathon

While you were snoozing last week, a group of Democratic senators were at work on the Senate floor. Senator Brian Schatz said:

We have a simple message for all Americans: We’re not going to rest until Congress acts on the most pressing issue of our time.

A lack of jobs? Americans losing their health insurance? The deficit? Which of these issues did Schatz and his 30 cohorts stay up all night to debate and demand action on?

Climate change. That is right, with Americans dropping out of the workforce in record numbers and cancer patients unable to see their doctors, our leaders are taking turns talking on the floor about global warming. And according to a spokesman from Sen. Sheldon Whitehouse’s office, this is not the last time that we will hear from the Senate Climate Action Task Force.

This is just a desperate attempt to appeal to their donor base and bring a non-issue to the forefront to distract from Obamacare, a weak president, and an ailing economy. The war on women was last election season’s non-sequitur (and no doubt it will be in full-swing again come this November), and we’ve already heard from the President and other members of Congress this year that we need to make addressing climate change a major priority.

But while the Democrats may want to hang their 2014 hat on global warming, climate change is, to voters, a relative non-issue. See this Pew poll from January: of a whopping 20 issues tested as policy priorities, the American public put global warming in 19th place, above only global trade issues. This is not some sort of statistical abnormality — global warming is routinely found at the bottom of the list.

Fun fact: Anthony Watts pointed out that the Senators conducted their talkathon from the warm and cozy Senate floor, courtesy of the Capitol’s coal-fired power plant.