Politicians usually love infrastructure projects. But politics has delayed the privately owned Keystone XL pipeline’s construction for three years now. Research Associate David Bier explains the reasons behind the delay, and points out that the pipeline’s real benefit isn’t the jobs it would create; it’s the wealth and value it would create.
Energy
As expected, the European Court for Justice — the EU’s highest court — has ruled that the EU’s plan to charge foreign airlines for their emissions through purchasing carbon permits complies with international law and doesn’t threaten foreign countries’ sovereignty.
As of January, aircraft landing or taking off from EU airports will be assessed carbon emission fees. (See yesterday’s OpenMarket for more background.) The carbon trading scheme is opposed by major economies, including the U.S., Japan, India, China, Brazil, Russia, and many others.
But that didn’t deter the EU or the high court. After all, the Court noted in its opinion, airlines can choose whether to use EU airports:
It is only if the operators of such aircraft choose to operate a commercial air route arriving at or departing from an airport situated in the EU that they are subject to the emissions trading scheme.
It has been reported that Canada and other countries will continue the battle through other channels, notably the UN’s International Civil Aviation Organization in Montreal.
The U.S. sent a strong letter to the European Union warning them that the EU’s airline emissions trading scheme — set to start in January 2012 — should be halted or postponed. If not, the letter from U.S. Secretary of State Hillary Clinton said, “. . . we will be compelled to take appropriate action.” According to the Financial Times (registration required), 42 other countries, including major economic powerhouses, such as China and Brazil, signed onto the letter, which seemed to be timed just before the EU’s highest court renders its decision.
On Wednesday the EU’s Court of Justice is expected to rule in favor of the EU’s plan to charge airlines — domestic and foreign — for their carbon emissions. The EU scheme would cover aviation in its controversial — and collapsing — cap-and-trade system for reducing carbon emissions. All planes landing or taking off in the EU would be forced to pay for their emissions, whether those were emitted over EU airspace or not.
Expanding the failing carbon trading system during a period of failing economies seems to be an act of self-flagellation on the part of the EU in the name of environmentalism. Or maybe they are hoping to bring other countries down to a “level playing field” of wasting billions of dollars that would flow into their coffers. A 2009 study by Matt Sinclair of the UK’s Taxpayers’ Alliance estimated that from its introduction in 2005 through 2008, the EU’s carbon trading scheme has cost European consumers €93 billion. Just last month The Australian reported that the Swiss bank UBS had issued a study stating:
. . . the European Union’s emissions trading scheme has cost the continent’s consumers $287 billion for “almost zero impact” on cutting carbon emissions, and has warned that the EU’s carbon pricing market is on the verge of a crash next year.
In a damning report to clients, UBS Investment Research said that had the €210bn the European ETS had cost consumers been used in a targeted approach to replace the EU’s dirtiest power plants, emissions could have been reduced by 43 per cent “instead of almost zero impact on the back of emissions trading.”
If the EU stands by its plan to exert control over airlines of other countries and to charge them for emissions, many have argued that it would attack the sovereignty of other countries, destroy the international legal system in place for airlines – the Convention on International Civil Aviation – put onerous economic burdens on airlines, and raise the cost of international travel and delivery services.
Retaliation would seem inevitable, which could plunge the fragile world economy into a destructive trade war.
President Obama ran on a platform of transparency. He praised whistleblowers. “Such acts of courage and patriotism,” he said, “should be encouraged rather than stifled.” He was intensely critical of the Bush administration that “ignored public disclosure rules.” The president and his staff have both said, “This is the most transparent administration in the history of our country.” Yet his administration has been even more secretive and hostile toward public disclosure than the previous. He has cracked down on whistleblowers (and the journalists who they leak to) more than any other administration in history. He has brought nearly double (5) the number of indictments against whistleblowers than all previous administrations combined (3), and is currently working on another.
On top of this war on whistleblowers, the president has fought Freedom of Information Act (FOIA) requests. “Two years into its pledge to improve government transparency,” the Associated Press reports, “the Obama administration handled fewer requests for federal records from citizens, journalists, companies and others last year even as significantly more people asked for information.” In November, Obama’s Justice Department proposed a rule that would allow them to lie about the existence of documents that were of national security concern. Last month, CEI’s Chris Horner called the administration the “most secretive ever,” and listed many ways in which under Obama, FOIA requests have been thwarted in the most underhanded ways.
Today, Horner has reported new outrages in Obama’s transparency war. He writes that “the United States Department of Justice (DOJ), Criminal Division, is working with United Kingdom police to pursue the leaker of the 2009 and 2011 ‘Climategate’ emails. I have learned that last week DOJ sent a search-and-seizure letter to the host of three climate-change ‘skeptic’ blogs. Last night, UK police raided a blogger’s home and removed computers and equipment.” He continues:
The leaked records derailed “cap-and-trade” legislation in the U.S. and, internationally, as well as talks for a successor to the Kyoto Protocol. The emails and computer code were produced with taxpayer funds and held on taxpayer-owned computers both in the US and the UK, and all were subject to the UK Freedom of Information Act, the U.S. Freedom of Information Act and state FOIA laws.
They also were being unlawfully withheld in both the UK (by the University of East Anglia) and the U.S. (Department of Commerce’s National Oceanic and Atmospheric Administration (NOAA), including stonewalling me for two years, and three other requesters for longer).
The hunt involving U.S. and UK law enforcement agencies is now escalating. On Wednesday night UK time, six detectives with the UK police (Norfolk Police Department) raided the home of at least one blogger, removing his equipment to look for clues to the identity of leaker “FOIA 2011.”
On December 9, DOJ sent a preservation letter under 18 U.S.C 2703(f) to the publication platform (website host) WordPress. This authority authorizes the government to request an Internet Service Provider (ISP) to preserve all records of a specific account for 90 days while the feds work on a warrant.
Norfolk PD affirmed to the subject of at least one of their raids that this international law enforcement hunt is for the leaker, meaning not for those whose acts the leaker exposed by making public emails containing admissions in their own words.
View the whole article here.
What is the single most expensive regulation of all time? Energy Policy Analyst William Yeatman has one candidate: the EPA’s proposal to regulate mercury emissions from coal-powered plants. If it passes, the regulation would cost at least ten billion dollars per year to benefit a very small group of people: pregnant women who have subsistence-level income, and eat mostly large fish caught in inland freshwater bodies.
Recently, Republican members of the U.S. House of Representatives have proposed opening up more federal land and offshore areas to natural resource extraction. Such a move would both increase domestic energy production and raise government revenues through royalty payments. During the current economic slump and resulting fiscal crunch, anything that can increase the quantity of energy supplied and reduce government deficits should be lauded. But what some Republican members of Congress propose to spend these revenues on is far from laudable.
Led by House Speaker John Boehner, some in the Republican caucus wish to pour oil and natural gas lease revenues into the Highway Trust Fund, which has suffered from severe shortfalls for several years now. Right now, a six-year surface transportation reauthorization proposal (“the highway bill,” the previous multi-year reauthorization expired 777 days ago) from House Republicans needs to find an estimated $75-$100 billion in additional revenues in order to fully fund their bill, and proponents of such a funding mechanism argue that this will help close the gap. Many in the free market energy community are also applauding.
However, both groups fail to appreciate the long-run dangers of moving from the current (and longstanding) “user-pays” principle to a “taxpayer-pays” principle. They ought to pay more attention to the concerns of free market transportation scholars, such as the Reason Foundation’s Robert Poole and the Independent Institute’s Gabriel Roth. Since the Interstate program was established in 1956, federal highway spending relied on the “user-pays/user-benefits” principle. The idea was to tax road users (on fuel, tires, etc.) and then use the tax revenues to fund maintenance and capacity enhancements. This makes sense, as one would expect user tax revenue to approximately track user demand. Revenues were deposited into the Highway Trust Fund, which is partially shielded from the highly politicized appropriations battles that take place over most funding. This concept has long enjoyed broad bipartisan support.
Recently, ActionAid USA and CEI filed a correction request under the Data Quality Act targeting misleading claims made by the EPA regarding the effects of ethanol mandates and subsidies, claims that have obscured how government policies have contributed to world hunger, malnutrition, disease, and death. This legal request, which was filed shortly before World Food Day, can be found here.
According to one recent study, ethanol diversion to fuel has caused nearly 200,000 excess deaths annually. Marie Brill, Senior Policy Analyst at ActionAid USA, stated: “High and volatile prices are already causing misery. The real price of a typical global food basket is up nearly 50% over the last year. With poor people in developing countries spending between 50-80% of their income on food, it is no surprise that 44 million people fell into extreme poverty from June 2010-February 2011 because of high food prices. The big surprise is that the EPA still fails to acknowledge the human impact of the Renewable Fuel Standard and still refuses to cite the plethora of reports that reveal the significant role of biofuels in global food price volatility.” According to Sam Kazman, CEI general counsel: “EPA’s refusal to address this issue has gone on long enough, and there isn’t a more appropriate time for the agency to change its approach than in the wake of World Food Day.”
In 2011, food prices soared all over the world, fueled by the fact “that more than a third of the corn produced in the U.S is now used to make ethanol.” As a result of such “bio-fuels” subsidies, one of the world’s largest food producers predicted a “global food crisis.”
Unfortunately, the Obama administration has long pushed ethanol subsidies, even though such subsidies have a history of spawning famines and food riots overseas. The administration is now forcing up the ethanol content of gasoline through EPA regulations, even though ethanol production results in deforestation, soil erosion, and water pollution.
President Obama has implied that his critics don’t understand math, which is odd given his inability to balance a budget (he’s run up the biggest budget deficits in history, after falsely promising a “net spending cut“). But it all depends on how you look at it. As one commenter puts it, “Obama is great at math. He divides the country, subtracts jobs, adds debt and multiplies misery.”
Economically, though, the president’s class warfare doesn’t add up. Even plundering the rich of all their income wouldn’t be enough to plug Obama’s skyrocketing deficits. As David Freddoso of the Washington Examiner notes, “In 2009, the earners Obama is targeting had only $1.5 trillion in income after paying their federal income taxes and before paying taxes to states and municipalities. Were Obama to seize every dime of that money, it would just barely cover the $1.3 trillion deficit he just ran in the fiscal year that ends next week.”
This is not the only kind of class warfare Obama engages in. He also forces middle-class taxpayers to foot the bill for corporate welfare for politically-connected cronies like the owners of Solyndra. Solyndra is the bankrupt solar manufacturer that recently went under, costing taxpayers hundreds of millions of dollars, after it received preferential treatment in the form of $535 million in federal loan guarantees under the stimulus package.
In his Forbes column, James Glassman provides a counterpoint to the Obama proposal to create a national infrastructure bank. Rather than direct funds through a new federal bureaucracy, he proposes, government should lift the barriers that are holding back private infrastructure investment.
[T]two of the largest prospective infrastructure investments in America are being blocked, or at least delayed, by government. One would result from the merger of AT&T and T-Mobile, which I discussed earlier on Forbes.com. The merger would accelerate deployment of a nationwide LTE 4G wireless network that would bring high-speed broadband to 97 percent of Americans.
The second investment involves energy. Wood Mackenzie, a consulting firm, recently released a report that showed that if the U.S. government allows further sensible energy development projects to go ahead, the results of building and benefiting from the new infrastructure would be over 1 million new jobs by 2018 and over $800 billion in extra government revenues by 2030.
Part of the problem is President Obama’s steadfast clinging to the notion of government spending as job creator. Obama unwittingly revealed the failure of that vision, as Glassman notes.
In his speech to a joint session of Congress, President Obama outlined a different set of taxpayer-funded infrastructure spending:
“The American Jobs Act will repair and modernize at least 35,000 schools. It will put people to work right now fixing roofs and windows, installing science labs and high-speed Internet in classrooms all across this country. It will rehabilitate homes and businesses in communities hit hardest by foreclosures. It will jumpstart thousands of transportation projects all across the country.”
The problem is that, no matter how well-meaning such projects may be, spending on them will be determined by political considerations.
The politicized nature of an infrastructure bank is underscored by the fact that, as The Bond Buyer notes today, “The bank would be run by a chief executive officer and a seven-member board of directors, all of whom would be appointed by the president and confirmed by the Senate.”
Another problem is that, if Obama’s remarks are anything to go by, none of the projects he mentions (except for the passing mention of his bill’s intent to “rehabilitate homes and businesses”) has much wealth-creating potential. He seems more focused on handing out more government contracts than on giving businesses the freedom to grow — and hire.
Infrastructure always needs money, but the choice is not funding si o no, but over which is a better way to provide funding over the long term: increasing direct government spending — and the cost of government on the private sector with it — or allowing businesses to flourish and therefore expand the tax base, by keeping taxes low and regulation light.
Myron Ebell, Director of CEI’s Center for Energy and Environment, takes a look at the brewing Solyndra scandal. Solyndra is a company that makes solar panels and recently declared bankruptcy. In 2009, the federal government gave Solyndra a $535 million loan even though its own analysts predicted the company would go bankrupt in 2011. The company’s cozy relationship with political figures, including a major political donor with an investment stake, make the loan — and its low interest rate — look rather suspicious.
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