Thursday, 30 January 2014

Carbon Fee and Dividend to be Debated in Canada's House of Commons tonight

Canadian Member of Parliament Bruce Hyer, from Thunder Bay, Ontario, will be delivering a speech in support of a Carbon Fee and Dividend proposal being championed by Citizens Climate Lobby Canada, to impose a carbon tax and refund the proceeds to Canadian households in lump sum payments. MP Hyer, whom I had the great pleasure of meeting last November, is not just a committed environmentalist, but is economically literate, a rarity for MPs and members of Congress. Hyer was the sponsor of Bill C-311, The Climate Change Accountability Act, the only bill in Canadian history to have passed the House of Commons and be quashed in the Senate without discussion, a stain on the normally Democratic and law-abiding Canada. His speech, along with reaction, will be broadcast at 6:45 pm Eastern time, can be followed at

Friday, 17 January 2014

Exporting Natural Gas, Coal, and Oil

Americans have gotten so used to being dependent upon imports for energy, now that the United States has genuine export potential for all three fossil fuels, it does not seem to have the ability to rationally discuss the tradeoffs.

I can say this: calls by old-fashioned, New Deal Democrats to avoid exporting natural gas are short-sighted. For a party that has held a vice-grip on environmental voters, this is a terrible stance. Pro-union sympathy entrepreneurs and energy-intensive manufacturers such as Dow Chemical are calling for a halt to approval of new liquified natural gas export facilities, on the grounds that exports would raise natural gas prices, and deprive American manufacturers of an energy cost advantage. Disturbingly but unsurprisingly, a number of environmental groups are also on board. Here are two reasons this is wrong-headed:

First, do we want artificially low energy prices? Is there any inkling among the New Deal Democrats out there that the United States might benefit from an economy that is more energy efficient? Do they really think -- are they truly dumb enough -- to think that we will develop a more energy-efficient economy by keeping energy prices artificially low? And is it really the raison d'etre of pro-union Democrats to keep skilled workers in energy-intensive manufacturing jobs? What happens if energy prices go up, say, because we get climate legislation (which New Deal Democrats say they favor)? Will these sectors and workers be prepared?

Second, if these New Deal Democrats could look beyond the United States, what is their plan for getting China to burn less coal? Wag our collective fingers at them? Negotiate some sort of meaningless "clean technology cooperation" agreement? The most important thing that can be done right now is to divert the People's Republic of China from its current path of development through coal-fired electricity generation. The best near-term hope of doing this is providing China with cheaper natural gas. Decades of environmental activism have not accomplished a tiny fraction of what hydraulic fracturing has done to finally topple coal from its perch as America's electricity fuel of choice. That is not something to get too giddy about right now -- the study released recently suggesting that natural gas leakage is contributing much more to greenhouse gas buildup than previously thought is very troubling. But that is a fixable problem -- the EPA could regulate those emissions, even without suffering the ignominy of having to go to Congress.

Third, building on that last point, EPA must, must, must clamp down on methane leakage. It must require oil extractors in North Dakota to capture methane. This can be more easily done if natural gas prices are high. It becomes more worthwhile (not completely worthwhile, absent regulation) for oil extractors to capture leaking methane, and it becomes more economically palatable to clamp down on leakage from the gas industry if it is turning a better profit. In fact, fast-tracking LNG terminal approvals might be very subtly politically coupled with some acquiescence from the gas industry to some sensible leakage and flaring regulations.

Now, let me beg out of saying anything about coal exports and oil exports. Coal exports have been on the agenda for years, and this past week Senator Lisa Murkowski opened up the prospect of lifting the U.S. crude oil export ban dating back to the 1970s. I can't really think of a purely economic reason and principled reason to oppose this, but I do. In the end, I am an environmental consequentialist. I think that sharing American coal and oil largess with China and others is a bad idea. Although some of the same arguments above could well apply to coal and gas, I believe that regulation under the Clean Air Act, including new greenhouse gas regulations on power plants and vehicle fuel efficiency standards, will help keep the expansion of coal and oil in check. This would not happen in China. So I say keep American oil and coal within its borders. I will not, however, invoke the disingenuous arguments that New Deal Democrats have put forth in opposing the export of natural gas. The U.S. should avoid exporting coal and oil just because it would defeat goals relating to climate change.