Iain Murray - 10 Cool Global Warming Policies

7/29/2019 Iain Murray - 10 Cool Global Warming Policies

1/32

N A T I O N A L C E N T E R F O R P O L I C Y A N A L Y S I S

10 Cool Global Warming Policies1

Global warming is a reality. But whether it is a serious problem and whether emis-

sions of carbon dioxide (CO2) and other greenhouse gases from human fossil fuel use

are the principal cause are uncertain. The current debate over the U. S. response

to climate change centers on greenhouse gas emissions reduction policies, which are

likely to impose substantially higher costs to society than global warming might.

Executive Summary

What should be done about the threat of global warming? Unfortu-nately, many proposals including mandatory limits on carbon dioxide(CO

2) emissions would be much more costly to society than the danger

it seeks to avert. Fortunately, there are policies that could be adopted thatare desirable in their own right and are commendable, even if there wereno threat of global warming. These policies would reduce greenhousegas emissions, increase energy efciency, reduce harms associated with

global warming or increase the worlds capabilities to deal with climate-change-associated problems. Here are 10 of them:

No. 1: Eliminate All Subsidies for Fuel Use. Subsidies for energyresearch and development, as well as the production, transportation, mar-keting and consumption of energy, encourage greater energy use and raiseemissions levels.

No. 2: Reduce Regulatory Barriers to New Nuclear Power Plants.Regulatory delays add substantially to the cost of nuclear power, which isthe only proven technology that can provide enough reliable emissions-

free energy to signicantly reduce greenhouse gas emissions.No. 3: Reduce Wildres through Alternative Forest Management

Institutions. Local and private forest management would reduce over-crowding and disease in poorly managed national forests, increasing theability of the trees to absorb carbon and reducing wildres, which releasehuge amounts of CO

2.

No. 4: Liberalize Approval of Biotechnology. Through biotechnol-ogy we are developing faster growing varieties of trees that can absorband store large amounts of CO

2as well as drought-resistant crops that can

thrive despite climate change.

Policy Report No. 321 by Iain Murray and H. Sterling Burnett June 2009

with contributions from Eli Lehrer and Greg Conko

Dallas Headquarters:

12770 Coit Rd., Suite 800

Dallas, TX 75251

972.386.6272 Fax: 972.386.0924

Washington Ofce:

601 Pennsylvania Avenue NW,

Suite 900, South Building

Washington, DC 20004

202.220.3082

Fax: 202.220.3096www.ncpa.org

ISBN #1-56808-198-7

www.ncpa.org/pub/st/st321/st321.pdf


2/32

10 Cool Global Warming Policies

2

No. 5: Repeal the National Flood Insurance Pro-gram. Subsidized ood insurance is responsible formuch of the development in coastal areas and in ood

plains. Eliminating this subsidy would make us less

vulnerable to higher sea levels and increased rainfall.No. 6: Increase Use of Toll Roads with Conges-

tion Pricing. Toll lanes with rates that vary accordingto time of day can reduce trafc delays that increaseenergy use and emissions.

No. 7: Remove Older Cars from the Road. Sub-sidizing the replacement of older vehicles with newerones would increase fuel efciency and reduce emis-sions.

No. 8: Reform Air Trafc Control Systems. Alowing pilots to y more direct routes and avoid leng

holding patterns and runway delays would save fuelreduce aircraft emissions.

No. 9: Remove Regulatory Barriers to InnovatEnvironmental regulations often increase the costs oreplacing older, dirtier facilities with newer, cleanerones.

No. 10: Encourage Breakthroughs in New Tech

nology. An X prize-type competition would encoage the development of new transportation and electpower technologies that reduce CO

2emissions while

meeting future energy demands.

About the Authors

Iain Murray is a director of projects and analysis and senior fellow in energy, science andtechnology at the Competitive Enterprise Institute (CEI). He writes regularly for print and

online sources, his CEI articles having appeared in The New York Post,Investors Business

Daily, the Financial Times, the Wall Street Journal, the Washington Examinerand many other

newspapers. He has appeared on Fox News, CNN Headline News, the BBC and Al-Jazeera

among other broadcast appearences. Mr. Murray holds a BA and MA from the University of

Oxford, an MBA from the University of London and the Diploma of Imperial College of Sci-

ence, Technology and Medicine.

H. Sterling Burnett is a senior fellow with the National Center for Policy Analysis. While

he works on a number of issues, he specializes in issues involving environmental and energy

policy. He also serves as an adviser to the American Legislative Exchange Council Energy,

Environment, Natural Resources and Agriculture Task Force (1996 - Present); a senior fellow

with the Texas Public Policy Foundation (2005 - Present); and a contributing editor toEnvi-

ronment & Climate News (2005 Present). Dr. Burnett has been published inEthics,Envi-

ronmental Ethics,Environmental Values, The Review of Metaphysics,International Studies

in Philosophy, The World and I, USA Today and the Washington Post. Dr. Burnett received a

Ph.D. in Applied Philosophy from Bowling Green State University in 2001.


3/32

Introduction

Global warming is a reality. Butwhether it is a serious problem nd whether emissions of carbon

dioxide (CO2) and other green-house gases from human fossil fueluse are the principal cause areuncertain. The current debate overhe U.S. response to climate changeenters on greenhouse gas emis-ions reduction policies, which areikely to impose substantially higherosts to society than global warm-ng might. The world will surelyegret it if billions of people are

mired in poverty because resourcesre diverted to solve a nonexistent

or trivial problem.2 On the otherhand, the world would regret do-ng nothing if human-made global

warming is a serious problem.

Fortunately, there are no-egrets policies that would prove

benecial whether or not human ac-ivities are creating a global warm-

ng problem. No-regrets policies:

Reduce the amount of green-house gases emitted into the at-mosphere, or

Mitigate, prevent or reduce harmsassociated with global warming,or

Increase societys capability todeal with problems associatedwith global warming, or

Reduce the amount of emissionsper unit of output or per unit ofenergy used, and

Dont impose signicant eco-nomic costs.

The policies discussed in thispaper should, to some degree,mitigate and/or allow us to adapt

to global warming, or both. Thesesteps would expand energy choices,improve energy efciency andincrease societal resiliency and

adaptability.

Some policies are likely toreduce greenhouse gas emissionsabsolutely and spur technologicalinnovation. Other policies wouldreduce energy intensity and/oremissions intensity. That is, theywould reduce energy use per unitof output, or dollar of gross domes-tic product (GDP), and/or reduce

emissions of greenhouse gases perunit of energy used. In fact, thetrend in all developed countries hasbeen toward more efcient energyuse. And greenhouse gas emis-sions reductions usually accompanyreductions in emissions of regulatedpollutants that are known at somelevel of atmospheric concentrationto adversely affect human healthand/or impose external costs on

society. These include gaseouscompounds of nitrogen and sulfur,carbon particulates, ozone (O

3) and

carbon monoxide (CO). AlthoughCO

2is often called a pollutant, it is

not: It is an atmospheric trace gasessential to plant life. The con-sumption of CO

2allows plants to

release oxygen, which is essential toanimal life.3

Each of these policies wouldmake it easier to meet emission-reduction goals without sacric-ing living standards. On the other

hand, if further research reveals thatthe threat from climate change isminimal and there is little need foremissions reductions, these policieswould still be benecial.

Costly Measures to

Combat Climate Change

Conventional approaches to com-bat climate change could imposeconsiderable costs, with little cor-responding benets. Specically,the Obama administration plans toimplement a cap-and-trade systemto reduce greenhouse gas emissionsUnder a cap-and-trade system, thegovernment sets a ceiling on totalemissions and auctions, or givesaway, allowances to the affectedindustries permitting them to emit

CO2. Companies that continue toexceed their cap can purchase un-used allowances from others.

The goal of a cap-and-tradesystem is to gradually reduce thenumber of allowances until emis-sions are cut to the desired level.Europe instituted such a system tomeet its goals under the Kyoto Pro-tocol, the international agreement

to limit greenhouse gases.4

Yet, ex-perience in Europe and elsewhere,and theoretical modeling, suggeststhat the price required to achievethe emissions reductions through acap-and-trade system vastly exceedthe likely cost of those emissions tosociety. In fact, Europe has not yetmet its goals for emissions reduc-tions. The reason: The number of

Insert callout here.No-regrets policies

are benecial, regardless

of global warming.


4/32


4

allowances has not been cut becauseof public resistance to energy priceincreases from interim emissionslimits.

The Cost of Cutting Green-

house Gas Emissions. Variousstudies have calculated the poten-tial costs of actions to prevent orreduce future global warming. Forinstance:

A study by economist StephenBrown of the Federal ReserveBank of Dallas estimates that ifthe United States attempted to cutemissions by the amount required

by the Kyoto Protocol, GDP in2010 would be $275.2 billion to$467.8 billion lower than oth-erwise representing a loss of$921 to $1,565 per person.5

The United Nations has calcu-lated that stabilizing CO

2levels

at 550 parts per million (which

many scientists believe is nec-essary to prevent the most direharms from global warming)would cost trillions of dollars.6

The Cost of Global Warming.

Published economic studies agreethat the costs CO

2emissions impose

on society are quite small includ-ing current and future costs, andboth private and external harms.In the most comprehensive reviewof researchon the costs of climatechange to date, economist RichardTol analyzed 103 estimates of themarginal damage of CO

2emissions

from 28 published studies. He con-cluded that with reasonable assump-tions about future harms, emissionscenarios and technological change,it was very unlikely the social costswould top $14 per ton and wouldprobably be closer to $2 per ton.7

On the other hand, the SternReview of the Economics of Climate

Change, an inuentiBritish government rport, calculated the scial cost of carbon em

sions at $85 a ton, mhigher than almost aother estimate. But report found such hisocial costs becausethe author, economisNicholas Stern, set thdiscount rate for harfrom global climatechange at almost zer(0.1 percent). Most

economic analyses ua much higher discorate.

In contrast to themarket, at a discoun

rate of exactly 0 percent, $1 billitoday is worth only $1 billion 10years from now. This would beappropriate if people were indif-ferent about when they receive a

enjoy the benets of the dollars.is precisely because people are nindifferent that the market rate ointerest is positive rewardingpeople who delay consumption.

Stern argued that present genetions have a moral obligation toprotect the interests of future generations, because people who arenot yet born cannot express their

own future preferences. Howevthe choice of which discount ratuse is not about the weight to givthe well-being of future genera-tions but about opportunity costsInvestments people make today likely to increase the wealth of thdescendants, giving future genertions greater resources to exercistheir preferences regarding envir

Estimated

Social Cost per

Ton of Carbon

Additional

Cost per

Kilowatt Hour

of Electricity

Additional

Cost per

Gallon of Gas

Increased

Household

Expenditure

on Electricity*

Increased

Household

Expenditure

on Gasoline*

$85 8 74 $853 $626

$24 2.5 20 $266 $229

$5 .5 4 $53 $46

Table I

Effect of Carbon Taxes on Energy Costs

*Note: Assumes average household use of 10,600 kWh of electricity and 1,143 gallons of gasoline annually.

Source: Authors calculations.


5/32

mental protection. The higher theate of return earned on a dollar in-

vested today, the more wealth futuregenerations are deprived of if the

money is spent now. Thus, KevinMurphy of the University of Chi-ago argues that the market interestate should be used as the discountate because that is the opportunityost of spending money on climate

mitigation.8

Interestingly, Sterns own modelssumes that people 200 years from

now will have real incomes that are

more than 10 times incomes today.This means that if the governmentaxes people today either explic-tly or through regulations toeduce climate change in 200 years,he government will be taxing the

poor to help the rich.

Environmental interest groupshave seized upon Sterns extremestimates to lobby for substantial,

mmediate action to cut greenhousegas emissions. These actions couldnclude a cap-and-trade system or aax on the carbon content of fos-il fuels, including oil, natural gasnd coal.9 A carbon tax would raisehe cost of a gallon of gasoline or a

kilowatt-hour (kWh) of electricitygenerated by coal or natural gas.The rate of the tax could be in-reased until the estimated costs of

limate change are recouped by so-iety or (at what may be a differentax rate) greenhouse gas emissionsre reduced to the desired level.

If Sterns estimated $85 per tonocial cost for CO

2emissions were

used to set a carbon tax rate,or aap-and-trade scheme were im-

posed to limit emissions to the levelrequired to minimize the social cost,how would it affect electricity andgasoline prices?

Assuming the average U.S.household uses 10,600 kWh of elec-tricity and 1,143 gallons of gaso-line annually, increasing the costof energy derived from fossil fuelsby $85 per ton of emissions would

result in additional annual energyexpenditures per household of justunder $1,500. This would surelydiscourage some energy use. [SeeTable I.]

Using more realistic discountrates, the likely cost of those emis-sions is at most just under $500 perhousehold annually and quite pos-

sibly under $100. These gures, ifapplied globally, would still imposehigh energy costs on developingcountries, severely retarding devel-opment in these poor regions.

In contrast to the economic coststhat limits on greenhouse gas emis-sions will impose, this study recom-mends policies that would bring

substantial economic gains to soci-ety. Thus, regardless of the threatposed by global warming, thesepolicies should be adopted on theirown merits. They will substantiallyimprove energy efciency, reduceemissions or expand the capabil-ity of society to deal with climatechange, which are important ancil-lary benets.

Source: World Energy Outlook 2006, International Energy Agency, p. 280.

Figure I

Fossil Fuel Subsidies in Developing Countries


6/32


6

No. 1: Eliminate AllSubsidies for Fuel Use

While many governments of de-veloped nations argue for a world-wide reduction in fossil fuel use inorder to combat climate change,

those same governments also subsi-dize energy use and production.

Subsidies Worldwide. In 2001,the countries of the EU-15 (the oldEurope nations in the EuropeanUnion) spent $16.77 billion (in2009 dollars) subsidizing coal and$11.23 billion subsidizing oil andgas.10

The International Energy Agency(IEA) estimates that developingcountries spend around $220 billionannually on subsidies for energyproduction and consumption, ofwhich $170 billion subsidizes fossilfuels [see Figure I].11 Includingdeveloped countries, subsidies forenergy production and consumptionworldwide amount to around $300billion, the majority of which arefor fossil fuels.12

Such subsidies reduce energyprices below what the market wouldset, encouraging greater use andraising emissions levels. Direct

subsidies include grants to produers and consumers, governmentinvestment in research or infra-structure and preferential loans otax treatment. Indirect subsidiesinclude trade restrictions, price cand market regulations that guartee sales volume and restrict competition.

Many signatories to Kyoto susidize carbon-based fuel use andproduction. Such subsidies tiltthe playing eld, discouragingresearch expenditures by privateenergy companies in developingalternative energy sources. Prod

Table II

Energy Subsidies, Fiscal Years 2007 and 2008

(millions of 2007 dollars)

Source: Federal Financial Interventions and Subsidies in Energy Markets 2007, Energy Information Administration, Executive

Summary, Table ES1.

$ $ $ $ $

$ $ $ $ $


7/32

rs and consumers of other energyources then demand subsidies tolevel the playing eld. Thus,

government intervention causes

ignicant distortions in energymarkets.

British Petroleum estimates thatountries that subsidize transporta-ion fuel use accounted for 96 per-ent of the increase in oil demandn 2007.13 Many of them are less-

developed nations that subsidizeboth production and consumptionof fuels. The IEA estimates that

emoving domestic price subsidiesn China, India, Indonesia, Iran,Russia, Kazakhstan, South Africand Venezuela would reduce globalnergy use 3.5 percent and reduce

global CO2emissions 4.6 percent.14

U.S. Energy Subsidies. TheU.S. Energy Information Adminis-ration (EIA) calculates that federalnergy subsidies amount to $16 bil-

ion annually [see Table II]: 15

In 2007, the federal governmentspent approximately $5.5 billionon subsidies for the coal, oil andnatural gas industries princi-pally tax breaks for investment including $3 billion for coaland natural gas, and more than $2billion for research and develop-ment of clean-coal technology toreduce greenhouse gas emissionsfrom coal.

The government spent an addi-tional $1.2 billion for electricityproduction and use(not fuel spe-cic), and $2.8 billion to increasethe energy efciency of homes

and businesses.

It spent an additional $5 billionfor renewable energy productionand use, mostly in the form of taxbreaks.

Finally, $1.2 billion went to the

nuclear industry.

The EIA found that subsidiesdoubled from 1999 to 2007, duemainly to expanded subsidies forrenewable energy and clean-coaltechnology.

Policy Recommendations.There are a number of neutralenergy policies that could be imple-mented at the national or interna-

tional level to reduce subsidizedproduction and use:

International trade talks shouldinclude eliminating subsidies forfossil fuel production and con-sumption.

National budgets should be re-viewed with the goal of elimi-nating programs that encourageenergy use.

Subsidies and tax breaks, or taxpenalties, for specic energytechnologies should be elimi-nated to remove price distortionsin energy markets.16

A neutral energy tax policy, forexample, would include replac-ing the federal tax-depreciation

schedule for investment in newcapital stock with immediate ex-pensing.17 New equipment almostalways produces fewer emissions

per unit of output than older equip-ment. Changing the depreciationschedule so that new investmentscould be written off immediatelywould make it protable to replaceold equipment at a much quickerpace. This simple change could domore to increase energy efciencythroughout the economy than thecurrent complicated expensingregime.

Why Is This a No-Regrets

Policy? Subsidies for energyresearch and development (R &D)cost taxpayers millions of dollarsbut produce minimal benets.18The Congressional Budget Ofceand other analysts note that federalR&D money rarely produces com-mercially viable technologies. Inresponse to consumer demand or in

search of efciencies, the privatesector invests in technologies withthe potential for marketable innova-tions. On the other hand, govern-ment R&D funding has often beenallocated on the basis of politicalfavoritism. For example, taxpayersinvested about $1.5 billion in theBig Three automakers in an effortto develop hybrid engine technol-ogy, but privately nanced Japanese

research rendered the technologyobsolete.19

An international agreementwith binding targets to end energysubsidies would arguably reduceemissions to a greater extent and ata lower cost than Kyoto-type agree-ments. It would combat energyobesity worldwide rather than force

Insert callout here.Governments

subsidize energy use

and production.


8/32


8

an energy starvation diet on devel-oped countries that have the highestcosts of avoidance and account for ashrinking share of emissions.

Kyoto and more recent propos-als would have almost no effect onoverall emissions since they do notinclude fast-growing developingcountries, such as China (now the

No. 1 CO2 emitter). The UnitedNations projects that these countrieswill produce the vast majority offuture CO

2emissions. By contrast,

an agreement to end energy subsi-dies that includes developing coun-tries would be less costly becausepreventing and/or reducing futureemissions in developing coun-tries is less expensive than forcing

developed countries to radicallyalter their energy and transporta-tion infrastructure. Although nosuch agreement has been proposed,it would make sense as part of theObama administrations new ap-proach to international energypolicy.

No. 2: Reduce RegulatoryBarriers to New Nuclear

Power Plants

Currently, nuclear power is theonly technology capable of provid-ing emissions-free energy on thescale required to signicantly re-duce carbon emissions. In the Unit-ed States, almost 700 million metric

tons of CO2

emissions annually avoided due to nuclear-generatedelectricity. Worldwide, nuclear g

eration reduces emissions by alm

2 billion metric tons below whatthey otherwise would be.

However, due to environmentantinuclear activism, which begain the 1970s, building a nuclearplant takes a very long time. Thraises development and construccosts to the level that nuclear pois not economically competitivewith forms of electricity generatthat emit greenhouse gases, such

coal and natural gas. Accordingthe Nuclear Energy Institute, buiing a new nuclear power plant ta10 years from concept to operationly four years of which is needfor actual construction. The ad-ditional time is consumed by permit application development (twyears) and decision making by thNuclear Regulatory Commission(four years).

The application and approvalprocess has been streamlined ovthe past decade, but more needs be done. A potential nuclear powplant builder who has not yet decided to begin construction can an Early Site Permit applicationit takes an average of 33 monthsthe Nuclear Regulatory Commission to review it. By contrast, th

United Kingdom is introducing anew licensing process under whiplanning, application and licensitogether will take no longer thanmonths.20 This shows there is cosiderable scope for reducing regtory delays.

Policy Recommendations.There are policy changes that ca

Figure II

Comparison of Life-Cycle Emissions(Tons of CO

2Equivalent per GWh)

1,041

622

46 39 18 17 15 14

Coal NaturalGas

Biomass Solar PV Hydro Nuclear Geo-thermal

Wind

Source: Life-Cycle Assessment of Electricity Generation Systems and Applications for Climate

Change Policy Analysis, Paul J. Meier, University of Wisconsin-Madison, August 2002.

Note: GWh denotes one billion watt-hours.


9/32

ignicantly cut the costs of nuclear

power-plant construction and makenuclear power more competitivewith other generation technologies.

Put the industry in charge of

uel cycle management. Underhe Energy Policy Act of 1982,he federal government was sup-

posed to collect and manage spentnuclear fuel. Despite failing to doo, it continues to collect fees forhat purpose. The industry should

have the responsibility and abilityo decide how to dispose of the fuel

afely. Without an effective andgreed-upon approach to the man-gement of nuclear waste, nuclear

power is likely to remain too riskyn investment.

Remove commodity tariffs.Prices for vital construction mate-ials such as steel and cement arerticially inated by tariffs. Re-

moving import tariffs would reduce

onstruction costs. For example,arge amounts of concreteare usedn the construction of nuclear powertations, but thanks to high tariffs,he United States is experiencing aement shortage. Cement produc-rs such as Mexico have found thatt is more protable to send ship-

ments to China than to the UnitedStates because of a 40 percent U.S.mport tariff. In 2004, the Portland

Cement Association, a trade groupepresenting American and Cana-

dian companies, found that 29 stateswere experiencing shortages despitehe fact that virtually all U.S. ce-

ment plants were working aroundhe clock, seven days a week. Lift-ng or reducing the tariffs would

obviously benet other areas of theconomy, such as home building,

making this a wide-reaching no-regrets policy.

Ease immigration requirements

for skilled workers. The aging U.S.

nuclear industry is losing skilledworkers to other careers or retire-ment. Unfortunately, the employ-ment of highly skilled immigrantworkers is severely limited by thehighly restrictive H1-B visa pro-cess. Reforming this process wouldgreatly increase the labor poolavailable and lower costs.

Remove regulatory barriers to

uranium mining. The industry willneed fuel supplies, and various reg-ulatory barriers restrict explorationand mining of domestic uraniumon both public and private lands.These barriers must be removed.


Policy? Over the next 20 years,U.S. electricity demand is expectedto increase more than 45 percent.

Even the most comprehensiveconservation and efciency effortswould offset less than one-fourth ofthis increase in demand. Not count-ing hydropower, the rated capacityof all renewable energy combined isless than 2 percent of total generat-ing capacity. Furthermore, intermit-tent sources of electric power, suchas solar and wind, require redundant

power plants. Power plants fueledby coal, natural gas or nuclear fuelare the only reliable sources forbaseload power (required to keep

electric power owing) and peak-ing power (required to meet dailyspikes in demand). Natural gas andcoal both emit CO

2as a byproduct

of combustion. [See Figure II.]Absent a signicant breakthroughin the capture of carbon, nuclearfuel, which emits no CO

2, is clearly

preferable for electric power. In-creasing nuclear power generationcan supply the energy needed for

continued growth while reducingfuture carbon emissions.

No. 3: Reduce Wildres

through Alternative Forest

Management Institutions

Forests are carbon sinks: As treesgrow they remove carbon dioxidefrom the atmosphere and store it intheir trunks, limbs and roots. In ad-

dition, forest soils, made up of deadorganic matter built up over time,store a large amount of carbon. Thecanopy provided by densely packedtropical and temperate forests slowthe decay of fallen leaves and otherorganic matter, slowing the releaseof carbon and facilitating its incor-poration into the soil.

A 40-year study of African, Asian

and South American tropical forestsfound that each year tropical forestsabsorb as much as 18 percent of allthe CO

2emitted by burning fossil

fuels.21 Temperate forests in theUnited States also absorb and storecarbon. In 2004, the EnvironmentalProtection Agency (EPA) estimatedthat forests sequestered 10.6 percentof the CO

2released by the combus-

Insert callout here.Nuclear power isemissions-free.


10/32


10

tion of fossil fuels, with urban treesabsorbing another 1.5 percent.22Other research indicates that U.S.

forests may sequester as much as 40percent of U.S. human greenhousegas emissions.23

Forest Fires Are a Growing

Climate Concern. Unfortunately,poor forest management in the Unit-ed States and other countries con-tributes to wildres, which directly

add carbon to the atmosphere andreduce the amount of CO

2absorbed

by forests. For instance:

Wildres in the United States

release about 290 million metrictons of CO

2into the atmosphere

every year equaling as muchas 6 percent of the nations an-nual emissions from burning fos-sil fuels.24

Pine beetle infestations havekilled so many trees in WesternCanada that they have contrib-

uted to a rise in large wildres,turning Canadian forests from anet carbon sink that absorbs 55million tons of CO

2per year into

a net emitter of up to 245 milliontons annually.25

The Australian government cal-culated that wildres in 2003 re-leased more than 190 million tonsof CO

2, accounting for one-third

of the countrys total emissions,and it found that res in 2006 and2007 released an additional 360million tons of CO

2.26

In terms of total CO2

emissions,Indonesia is the third-largestemitter worldwide due largelyto its annual wildres whichemit nearly ve times as much as

its energy, agriculture and wassectors combined.27

How Government Owner-ship Contributes to Forest Fire

Large-scale forest res are prima

ily the result of poor managemenof publicly owned forests. Fedemismanagement of U.S. forests increased the number, size and cof wildres over the past decade

[See Figure III.] Historically, thnational forests have been loggeto provide lumber for commerciactivities, to prevent wildres anto promote forest recreation, speprotection and land managemenIn recent decades, political pressand lawsuits from environmentalobbyists prevented or delayed bcommercial and salvage loggingturning much of our national forinto tinderboxes.

Policy Recommendations.Changing the management strucof national forests could enhance

the quality and value of these lan

Privatizing the forests. Theprivate sector currently preserveprotects and promotes many his-torically important properties anmanages the majority of the coutrys forests and rangelands in wthat promote environmental quality and benet the owners and th

public. The United States can sa

and perhaps protably sell somethe hundreds of millions of acresnational forests for market valuegiving the owners of adjacent prerties priority for ownership.

Possible buyers include forestproduct companies, sportsmensclubs and environmental groupsWhile these lands will no longer

Figure III

National Fire Statistics, 1998 and 2007

Source: National Interagency Fire Service.

9,328,045acres

85,705res

1,329,704

acres81,043res

1998 2007


11/32

public forests, many and perhapsmost will be managed sustainably,n ways that protect their naturalharacter and enhance their en-

vironmental and economic valuebecause of the incentives of privateownership. Private companies donot have the general treasury tobail out money-losing operationsnd therefore seek to maintain the

value of their lands. Furthermore,privatizing public lands wouldncrease the tax base in rural areasnd reduce the strain on the federal

budget.

Public versus Private Manage-

ment. Private property ownershave exibility in managing their

ands, whereas federal forest man-gement is too often hampered

by rigidity. For instance, when awildre struck near Storrie, Calif.,n August 2000, more than 55,000cres burned, mostly in the Plumas

National Forest (28,000 acres) and

Lassen National Forest (27,000cres). About 3,200 acres of privateorestland managed by W.M. Beatynd Associates also burned. How-ver, the Forest Service and Beatysesponses couldnt have been more

different. By 2001, Beaty forestershad:28

Reduced the chance of a futurecatastrophic wildre by remov-

ing smaller dead trees and woodymaterial generating enoughclean biomass to fuel 3,600homes for a year.

Harvested larger dead treessuitable for lumber processing amounting to 64.5 millionboard feet, enough to build 4,300homes.

Spent millions of dollars to re-forest the burned land, plantingnearly one million seedlings ofseven different tree species.

By contrast:

The Forest Service removeddead trees and other fuels fromonly 1,206 acres and replanted230 acres in the Lassen NationalForest.

In the Plumas National Forest,the Forest Service was preventedfrom removing dead trees and re-forested only 181 acres.

Private forest owners are nothindered by bureaucratic federalrules requiring multiple studies,public hearings, comment periodsand court challenges. Thus, theyare better able to prevent infesta-tions and respond quickly to diseaseoutbreaks. Promptly removingdead and dying timber can preventinfestations from spreading to otherareas and prevent potentially cata-

strophic res. Private companieskeep the number of trees per acre atan optimal level. This reduces re

hazards and lets sunlight reach theforest oor, which helps regrowthand biodiversity.

Alternatives to Outright Priva-

tization. For political reasons, itmay be impossible to sell certain

national forests, but there are vari-ous mechanisms or institutional ar-rangements that would confer manyof the benets of ownership without

removing land entirely from publiccontrol.

For instance, following a sugges-tion by economists Richard Stroupand John Baden, Congress couldestablish Wilderness EndowmentBoards to own and manage nationalforests lands.29 These government-chartered, nonprot entities, whoseboard members would be approvedby Congress, would have a narrow-

ly dened duciary duty to protectand enhance the natural values ofthe land under their charge. Ac-tivities such as oil and gas produc-tion, commercial hunting and otherresource production could enhanceforests without hurting the environ-ment; such is the case with proper-ties managed by the Audubon Soci-ety and the Nature Conservancy.

Each individual board woulddecide how to balance use, recre-ational access and strict off-limitspreservation, bound only by theirunderstanding of what is necessaryto preserve and enhance the landwhile generating the revenues nec-essary to manage it.

Reintroducing Competition.Public lands retained by the federal

governmentcould still receive someof the environmental benets ofprivate ownership if federal, stateand local governments competedfor control of these landswithinthe public system.30 For example,teams of experts from federal andstate agencies, environmental orga-nizations and the timber industry inMontana and Minnesota compared

Insert callout here.Forest res

release CO2.


12/32


12

the environmental effects of stateand federal forest managementpractices.31 They all concludedthat state foresters better protected

watersheds and waterways from theimpacts of logging and other activi-ties:

In Minnesota, 90 percent ofcounty lands had the highestcompliance rate with best man-agement practices for protectingwater quality; federal forests hada slightly lower compliance rateat 87 percent.

In Montana, 99 percent of the watersheds in state forests wereprotected from all impacts fromlogging, compared to 92 percentin federal forests.

Congress could allow any stateor county that demonstrates supe-rior economic andenvironmentalperformance to take over the man-agement of the national forestswithin their state or area. Congress

could give xed but declining blockgrants during a transition period tothe forestry agencies that apply andallow them to retain any revenuesgenerated. The program shouldbe allowed to run for several yearsso state and county foresters couldcounteract the effects of federalmismanagement.

At the end of the trial, states and

counties that have improved a for-ests economic and environmentalperformance could be granted theforests outright and federal pay-ments ended. If forests have notimproved, they could be returnedto federal control and new manage-ment experiments implemented.This program would provide ForestService managers with an incentive

to improve performance or risk los-ing control over the lands.


Policy? Any of the managementregimes suggested above shoulddecrease the size, intensity andfrequency of wildres, meaningless CO

2will be pumped into the

atmosphere each year and more car-bon stored. Also, where there arecurrently more dead or dying treesor in burnt-over areas, trees willbe replanted at a more rapid rate,increasing the carbon uptake of thenations forests.

When pest infestations and resdo occur, the incentives for the newowners will be to help the forestrecover as soon as possible in orderto help wildlife recover, reduce soilerosion and stream destruction,restart natural ecological cycle and/or make a prot.

What about international for-

ests? Despite the various legalsystems and property rights regimesaround the world, all forests shouldbenet from a no-regrets solutionsuggested in the next section: thewidespread adoption of agriculturalbiotechnological innovations. Asmentioned below, scientists aregenetically engineering trees thatgrow faster and can store carbon at

a higher rate than existing varietSuch trees can be planted in forewhere commercial timber produers are operating and in tropical

forests previously lost to slash-aburn agriculture. In addition, thadoption of new biotech crops thincrease yields, improve nutritioand/or reduce the need for such puts as fertilizers should also redstress on tropical forests by reduing the need of farmers to movefrom one forest plot to the next tmaintain annual production.

No. 4: Liberalize Approof Biotechnology

The 1995 introduction of ge-netically engineered, or biotech,crops in the United States and otcountries provided farmers withvaluable tool to increase farm yiwhile protecting the environmenHowever, a maze of scienticall

indefensible rules governing the

testing, development and sale ofbiotech seeds, plants and the fooderived from them has greatly hidered the use of biotechnology tbenet the environment.

Environmental Benets of B

tech Crops. Crops have been gnetically engineered to grow morobustly with less pesticides andherbicides and to resist several p

diseases that reduce yields. In 2alone, biotechnology-derived plaincreased U.S. food production bapproximately 4 billion pounds,saved $1.2 billion in productioncosts and decreased pesticide usby about 46 million pounds.32 Thave improved air, soil and watequality as a consequence of redutillage, less chemical spraying an

Insert callout here.Well-managed forests

absorb CO2.


13/32

uel savings, and they have en-hanced biodiversity as a conse-quence of lower insecticide use.33

Scientists from Louisiana StateUniversity and Auburn Universityound that fewer natural resourcesre consumed to manufacture andransport pesticides when farmers

plant bioengineered pest-resistantotton. They estimate that biotechotton saved 3.4 million pounds

of raw materials and 1.4 millionpounds of fuel oil in 2000 thatwould otherwise have been con-umed in the manufacture and dis-ribution of synthetic insecticides.

Additionally, 2.16 million poundsof industrial waste were eliminated.Farmers used 2.4 million gallonsess fuel, 93 million gallons less

water and saved 410,000 hours ofabor.

Genetically engineered herbicide-olerant crops have encouragedarmers to adopt practices thateduce tillage or eliminate it alto-

gether.34 Low-tillage practices candecrease soil erosion up to 90 per-ent, compared with conventionalultivation. This saves valuableopsoil, improves soil fertility and

dramatically reduces sedimentationn lakes, ponds and waterways.35

Crop varieties such as corn,

wheat and other crops are be-ng developed that are drought andheat tolerant, have increased soil-nutrient uptake and can grow inalty and acidic soils. They couldncrease agricultural productiv-ty dramatically.36 Even delayingipening of fruits and vegetablesould substantially enhance foodupplies because post-harvest and

end-use losses are estimated to beas high as 47 percent worldwide.37All of these changes would furtherreduce energy use and consequentemissions in both food productionand transport.

Potential Carbon Sequestra-tion. Plants by their very nature ab-sorb carbon when growing, therebysequestering it in their bodies and

remains. In fact, most fossil fuelstoday are a result of carbon seques-tration by plants during the Car-boniferous era. Biotechnology alsoincreases the carbon-sequestrationpotential of agriculture.38

For example, faster growingvarieties of trees that absorb largeamounts of CO

2are being de-

veloped. Such trees can also belogged, thereby saving existing old-growth forest and also, by virtue oftheir fast growth, take up far lessland area than traditional lumbersources.

Adaptation to Climate Change.

Biotechnology can also be used todevelop crops that are more resis-

tant to climate extremes and thusto problems that global warmingmight exacerbate. Some research-ers have argued that global warmingwill increase drought, making somecurrently arable land unsuitablefor agriculture and making currentdrought-prone or arid lands evendrier. Thus, developing crops thatcould be grown on arid lands would

Figure IV

Annual Flood Damage Averaged Over 10-Year Periods

(billions of 2002 dollars)

19031912

19131922

19231932

19331942

19431952

19531962

19631972

19731982

19831992

19932002

Total: $32.8 Billion

$1.8$2.0 $1.9

$3.5$3.8

$2.2

$4.0$4.2

$3.2

$6.4

Source: National Weather Service estimates.


14/32


14

Policy Recommendations.Changing current policies regardbiotechnology can have many potive effects, whether or not globa

warming imposes signicant haron society.

Eliminate or reduce barriers.Eliminating or reducing the amoof time needed for biotech cropsbe approved would substantiallyincrease food production aroundworld. It would also allow deveing countries to adopt these cropcontributing to the incomes of

these agricultural nations. Thus,increased yield from the adoptiothese crops would benet farmer

consumers and the environment


Policy? Biotechnology can lowemissions by reducing the amouof energy used to produce food aby providing greater sequestratiopotential. It also makes it easier

to feed vulnerable populations ifglobal warming results in increadrought or threatens the failure otraditional crops.

No. 5: Repeal the

National Flood Insuran

Program

Sea levels are predicted to rise

as a result of thermal expansionand melting glaciers, principallyGreenland and Antarctica.47 Muof the concern over the potentialharm of global warming to the Ued States relates to coastal ooding as a result of higher sea leveHowever, much of the investmenpotentially vulnerable areas is a sult of the National Flood Insura

found that biotech plants and foodspose no new or unique risksandrequire no different standards orsafety regulations than conventional

crops.

43

However, these regulationsimpose vastly higher burdens onbiotech varieties, and the expenseof complying with these regula-tions makes it uneconomical to usebiotechnology for all but the largestcommodity crops.44

Many countries have effectivelybanned biotech crops altogether.

Despite the favorable recommenda-tion of the relevant scientic com-mittees, members of the EuropeanUnion and others use a highly po-liticized regulatory system to rejectapproval of most biotech varieties.45Consequently, many of the poor-est nations in Africa and Asia havebeen reluctant to approve biotechcrop varieties for fear of jeopar-dizing important export markets.

For example, even though severalinsect-resistant, pathogen-resistantand herbicide-tolerant rice variet-ies have been developed by Asian,North American and Europeanscientists using biotech methods,none are commercially available inAsia because European commodityshippers have threatened to boycottnations that adopt biotech rice.46

be a positive adaptation in the faceof rising population.

Indeed, scientists are using

biotechnology to create varietiesof corn, wheat and other crops thatcan thrive with little water. As theworlds population expands andglobal warming alters weather pat-terns, water shortages are expectedto hinder efforts to grow morefood.39 Although people consumeonly a quart or two of water everyday, the plants and meat they eat ina typical day require 2,000 to 3,000

quarts to produce.

Although genetically enhancedvarieties of major commodity cropshave been introduced in the UnitedStates and nearly two dozen othercountries, their broader adoptionhas been hampered by burdensomeand scientically unjustiable regu-latory hurdles and, in many cases,outright bans. In the United States,

all new biotech crop varieties areregulated by the U.S. Department ofAgriculture (USDA), which treatsthem as posing a threat of invasive-ness or weediness until severalyears worth of tightly controlledeld testing demonstrates that they

will not be injurious to agricul-ture.40 The EPA also regulatesbiotech varieties that are engineeredto resist insects and other pests or

plant diseases under rules similarto those governing chemical pes-ticides.41 Furthermore, the safetyof biotech foods is regulated bythe Food and Drug Administration(FDA).42 Countless scientic bod-ies including the U.S. NationalAcademy of Sciences, the AmericanMedical Association and the Insti-tute of Food Technologists have

Insert callout here.Biotech crops can feed

a warming world.


15/32

Program (NFIP). This 41-year-oldprogram has arguably outgrown itsoriginal purpose, which was to pro-vide temporary ood insurance to

property owners who were unawarehey were in ood-prone areas.48Because of full-disclosure mortgagend insurance requirements, nearlyll current owners were aware ofheir areas ood problems whenhey purchased or developed their

properties. Today, federally subsi-dized ood insurance encouragespeople to build homes where theyotherwise would not. It encourages

enders to nance mortgages theyotherwise would not. Today, NFIPovers almost 5 million homes in

more than 20,000 communities.This program offers insurance atubsidized rates for properties thatre prone to ooding. Thus, it en-ourages high-risk development and

harms environmentally sensitive ar-as, including wetlands, oodplainsnd coastal marshes. The program

reates a moral hazard meaningt encourages people to take greaterisks because the government helps

bear those risks. Frequently, the re-ult is lost lives, destroyed property,ivelihoods and environmental de-truction. Thus, ending the program

would be a valuable adaptation to aworld with rising sea levels, as wells discouraging development thatreates problems today.

Flood Insurance Subsidies.Historically, the NFIP retarded thedevelopment of private ood insur-nce in the United States, becauset was created when the privateector was just beginning to offer

ood protection. Thus, the NFIPdisplaced the emerging privatemarket.49

The NFIP subsidizes premiumsfor roughly 20 percent of the cov-ered properties, most of which weredeveloped prior to the programs

beginning in 1968. The other 80percent of properties pay premi-ums that actuaries believe will beadequate, over time, for the NFIPto break even. But these premiumsare inadequate for two reasons.First, the maps used to determinethe risk of ooding and thereby setNFIP premiums are inaccurate andout of date. Second, the premiumsdont reect the risks associated

with some contingencies such asmajor catastrophes that privateinsurers consider.

The NFIP guarantees paymentsof damage claims on insured prop-erties. If the program runs out ofmoney to pay claims, it has theauthority to borrow from the U.S.Treasury. Thus, payouts are defacto guaranteed by the federalgovernment. The program has been

bailed out by taxpayers twice.

Policy Recommendations. Thefollowing reforms would eliminateNFIP subsidies and reduce the po-tential cost of coastal ooding.

Buy some properties. In somecases, government, private industryor a combination of the two mightbuy NFIP-insured properties and

convert them to more ood-resistant

uses such as golf courses andparks. Buyouts would be an impor-tant component of any exit strat-

egy for the NFIP and some parcelsof land are particularly suitable forconversion to other uses. However,buyouts alone cannot solve the pro-grams problems.

Sell the programs assets. ManyNFIP policies have some value onthe private market. Estimating theirvalue would be almost impossibletoday, because there is no marketprice for the insurance. One wayto create a market for the policieswould be to divide them into portfo-lios and sell them at auction. Suchsales would greatly reduce the gov-ernments role in ood insuranceand would deprive the governmentof revenues to subsidize the worstooding risks. Without internal

subsidies, some properties would beuninsurable, resulting in signicantlosses to the owners. However, thequestion of what to do about theseuninsurable risks should not slowreform.

Phase out the program. Afterselling the bulk of the NFIPs poli-cies, the program could be phasedout with a tax credit or grant pro-gram. Insured owners could begiven either a one-time grant pro-

portional to the decline in the valueof their property resulting from theNFIPs termination or more mod-est ongoing subsidies for a limitedtime.50


Policy? Reform of the NFIP wouldreduce the moral hazard involved inbuilding on vulnerable land, trans-

Insert callout here.

Subsidized ood

insurance promotes

dangerous coastal

development.


16/32


16

ferring the risk from taxpayers tothe private sector.

Reduce costs to taxpayers. The

NFIP continues to pay claims forhomes damaged or destroyed byoods, mudslides and other natural

disasters without requiring hom-eowners to relocate. Homeownerscan use the money to rebuild in thesame location, and the new homeis also eligible for NFIP coverage.According to the Federal Emergen-cy Management Agency (FEMA),repetitive claims are the most

signicant factor in increasing oodinsurance costs.

NFIP pays claims averaging $200million per year for about 40,000repetitively ooded properties.51

Since its creation in 1968, theNFIP has paid out nearly $1 bil-lion for at least 10,000 proper-

ties that have experienced twoor more losses, with cumulativeclaims often exceeding the valueof the property.52

Reduce subsidies for development

in at-risk areas. The GovernmentAccountability Ofce reports that

90 percent of all natural disastersinvolve ooding.53 Although theyare called natural disasters, many

would not be nearly as destructivehad people and property not beenplaced in harms way.

Flood damage costs increasedfrom an average of $2.6 billionper year (in 2002 dollars) dur-ing the rst half of the 20th cen-tury to more than $6 billion per

year in the past 10 years.54 [SeeFigure IV.]

In 2004 alone, FEMA received1.3 million applications for fed-eral disaster assistance due tohurricanes and tropical storms far exceeding the number for anycomparable past period.55

Reduce the at-risk population.

The National Climatic Data Cen-ter says that increased populationand development of coastal areasare responsible for the increase inlosses due to hurricanes.56 Accord-

ing to the 2000 U.S. Census, morethan half of Americans live within50 miles of a coast, and by 2025,75 percent will.57 Indeed, the HeinzCenter, an environmental researchinstitute, determined that in the ab-sence of insurance and ood control

programs, development density inareas at high risk of ooding wouldbe about 25 percent lower than inareas at low risk of ooding.58

The private sector will respondmore quickly than government ifthreats from global warming in-crease, thereby reducing the likelydamage. If global warming turnsout not to be a problem, the reformswould still produce signicantbenets by eliminating the marketdistortion created by the NFIP.

No. 6: Increase Use

of Toll Roads with

Congestion Pricing, an

No. 7: Remove Older Cafrom the Road

Worldwide, road transportatiovehicles account for approximat10 percent of net greenhouse gasemissions.59 For developed countries, the percentage is even high

Transportation accounts for 27percent of the European UnionCO

2emissions.

Road transportation compriseabout 80 percent, with automobiles accounting for more thanhalf.60

In the United States, the transportation sector accounts for 3percent of CO

2emissions, and

percent of the transportation tcomes from personal vehicles

Transportation represents agrowing portion of CO

2emission

in developing countries. Growinautomobile ownership is one reawhy China has surpassed the UnStates in CO

2emissions. In Mar

2009, Chinas auto sales exceedethose in the United States for thethird straight month.62

In addition to increasing the fueconomy of passenger vehicles,CO

2emissions per mile of travel

could be reduced by relieving trac congestion and removing oldvehicles from the road.

Increasing Trafc Congestio

In the United States, a signicanamount of automobile CO

2emis

Insert callout here.Developers rebuild

on ood-prone

properties.


17/32

ions result from growing conges-ion on the nations roads. Conges-ion increases travel time, worsensir pollution, increases CO

2emis-

ions and wastes fuel. According tohe Texas Transportation Institute,based on wasted time and fuel, con-gestion in 437 urban areas cost thenation about $78.2 billion in 2005.63n these congested areas:

The average cost per traveler was$707 in 2005, up from $680 in2004 (using constant dollars).

Approximately 2.9 billion gallons

of fuel were wasted, with 1.7 bil-lion of that total wasted in areaswith populations greater than 3million.

The amount of wasted fuel pertraveler ranged from 38 gallonsper year in the largest urban ar-eas to 6 gallons per year in thesmaller towns.

Travel time during peak periodsincreased by 38 hours a year, onaverage.

Another source of emissionss older cars, or clunkers. Newer

vehicles burn fuel more efciently;ince 1974, domestic new car fuelconomy has increased 114 per-ent 56 percent for light trucks.64

Newer vehicles also have multiple,

mproved pollution control monitorsnd mechanisms that reduce emis-ions. And because the vehicles are

newer, these controls work and thengines are tuned. As a result, sincehe 1970s:

Air quality has improved dra-matically across the board despiteincreased travel.

New cars emit 90 percent lessair pollution than cars from the1960s.65

Although driving is increasing by

1 to 3 percent per year, vehicleemissions are dropping 10 per-cent annually on average.66

How bad is this problem? Ina study of emissions in Chicago,University of Denver researchscientist Donald Stedman found that8 percent of the cars emitted morethan half of all of Chicagos carbonmonoxide, with vehicles 5 years or

older accounting for 88 percent ofthe worst polluters.67 In addition:

According to the BrookingsInstitution, a California study es-timates that although cars that are13 years or older account for only25 percent of the miles driven,they will produce 75 percent ofall pollution from automobiles by2010.68

Up to 60 percent of the pollutantsthat form smog are emitted byfewer than 5 percent of the ve-hicles almost all of them oldervehicles.69

Policy Recommendations. Re-ducing congestion and the num-ber of older vehicles on the roadsshould diminish the economic,

personal and environmental costs ofdriving.

Expand the use of congestion

pricing. Traditional toll roads areestablished to fund the constructionand maintenance of the roadway.Congestion pricing is a marketmechanism seeking to reduce thepersonal, economic and environ-mental costs associated with trafccongestion. Congestion pricingcharges varying fees for the use oftoll lanes or entrance ramps, withhigher fees during peak hours and

lower fees during off-peak times.

It is estimated that as many as 25percent of drivers during rush hourare on discretionary trips. Conges-tion pricing should encourage driv-ers to shift their discretionary tripsto off-peak periods. Congestionpricing could also encourage peopleto carpool, use public transit, com-bine multiple trips, nd alternative

routes or change their work/livinglocations to avoid the toll. Thesebehavioral changes should decreasetrafc on all roads.

To encourage widespread adop-tion of congestion pricing and roadconstruction, the federal govern-ment could restrict federal fundingor devote a share of the gas taxto new roads implementing such

systems. Alternatively, states couldsell the right to build new roads with congestion pricing toprivate toll companies and collecttaxes on generated revenue. Allow-ing private companies to competefor value-added toll road construc-tion and ownershipshould speedthe pace of construction and reducethe need to increase gasoline taxes.


Tollways reduce trafc

congestion and vehicle

emissions.


18/32


18

There is evidence that congestionpricing improves trafc ow:70

In London, after the adoption of

congestion pricing,trafc de-clined by 15 percent and traveltimes declined by 30 percent.

Similarly, bridges and tunnels be-tween New York and New Jerseyexperienced a decline of 7 per-cent during the peak morning pe-riod and 4 percent in the evening.

The reduction in pollution has

been substantial in other countries:71

London saw a 37 percent averageincrease in trafc speed, a 12 per-cent decline in particulate matterand nitrogen oxides and a 20 per-

cent drop in CO2.In Singapore, there was a 10m.p.h. increase in average speed,a 45 percent reduction in conges-tion and 176,400 fewer pounds ofCO

2emissions.

Stockholms congestion pric-ing plan resulted in 15 percentdecline in trafc congestion andup to a 14 percent decline in CO

2

emissions.

Retire older vehicles. Approxmately 75 million vehicles on throad are 15 years old or older.72Many cars continue to be driven

following inspection, despite faiing to meet emission requiremenHowever, advocates for the poorclaim that forcing the retirementolder vehicles unfairly penalizesthose unable to afford newer ve-hicles.

To avoid inequity, the govern-ment could pay owners to retiretheir older vehicles. Owners cou

accept or decline the offer; those

A Regrettable Climate Change Policy: Limiting Air Travel

Airlines are responsible for roughly 5 percent of the total global emissions of CO2. Some environmental

organizations and governments have proposed an international tax or regulatory controls to reduce the volumof air travel. For instance, the European Union is currently considering including aviation in its EmissionsTrading Scheme.77

It is unlikely the CO2 emissions from air travel will decline without a proportionate decrease in fuel use.Because fuel consumption is the second largest cost for airlines an estimated $10 billion per year, or 15percent of airlines operating costs the industry has already cut fuel consumption by nearly 50 percent perpassenger milesince 1977.78 Airlines invested in newer, more efcient aircraft and made operational changesthat increased efciency, such as lowering cruising speeds, taxiing with only one engine and shutting downengines when takeoff is delayed by inclement weather.79

The signatory nations to the Kyoto Protocol agreed to eventually lower total greenhouse gas emissions to1990 levels. However, lowering airline emissions by that much would force a dramatic reduction in air traveConsumers in the United States and Europe will be forced into other modes of travel that are often moreexpensive and substantially less safe per mile traveled. Barring changes in existing air travel regulations, theimposition of taxes or regulatory controls to meet 1990 emission levels could make it virtually impossible for

U.S. airlines to meet the increasing demand for air travel. The Air Transport Association (ATA) estimates thareducing emissions to 1990 levels would result in a 25 percent to 35 percent reduction in air services.

Airline fares and air cargo rates would skyrocket, service to smaller cities would be grounded and industryemployment would drop. ATA projections indicate that U.S. airlines would be disproportionately burdened,placing them at a competitive disadvantage with airlines from third-world countries, which would be exemptAirline deregulation beginning in the late-1970s is estimated to save consumers close to $20 billion per year.Greenhouse-gas emission controls now threaten to swallow those gains. As in other sectors of the economy,however, adopting deregulatory measures could enable airlines to reduce their per-trip fuel consumption.


19/32

ccepting would receive compensa-ion and benet society. A number

of programs are being considered inCongress. Under a plan proposed

by Sen. Diane Feinstein (D-Calif.),he vehicle being sold must bedrivable, registered in the UnitedStates and have an original fuelconomy rating lower than18 miles

per gallon. Sellers must purchasevehicles that are newer than 2004nd have 25 percent better fuelconomy than the federal targetsor that class of vehicles. Thisour-year plan is expected to cost

s much as $2 billion per year andetire one million older cars peryear.73

Rep. Betty Sutton (D-Ohio)proposes giving drivers of vehiclesight years old or older $3,000 to

$5,000 per car to buy more fuelfcient cars or use mass tran-it. Vouchers could only be usedor cars getting 27 miles per gal-

on or more (24 miles per gallonor trucks) the higher the fuelconomy, the better the voucher.

These plans could be improved.For example, the vouchers paid todrivers of older cars (eight years orolder) could be varied, accordingo the fuel economy of the car forts class in its model year. Owners

who retired less efcient vehicleswould get larger vouchers, ensuringgreater percentage of older vehi-les will be retired. Vouchers could

be used to purchase any vehiclehat meets current clean air emis-ion standards and that gets at least

2 miles per gallon more than thevehicle the driver retired. A mod-st improvement in fuel economy

across millions of vehicles wouldcertainly improve air quality.

Why Are These No-Regrets

Policies? Both policies should

result in cleaner air, helping citiescomply with federal air pollutionstandards while reducing fuel useand CO

2emissions. However, both

policies also provide solutions forother problems, including reliev-ing congestion and nancing road

construction. In addition, driverscan choose when to use roads andwhat vehicles to drive, dependingon their particular need.

No. 8: Reform Air Trafc

Control Systems

The increasing demand for airtravel means more ights, whichmeans greater fuel use and in-creased emissions. Yet, the currentgovernment-operated air trafc con-trol system, based on a 1930s-eranetwork of radio beacons, hindersinnovations that could reduce fueluse and emissions. Specically,allowing pilots to y more direct

routes between destinations so-called free ight could savesubstantial amounts of fuel and re-duce aircraft emissions by as muchas 17 percent.

Direct Flights. Generally, theshorter the ight, the less fuel is

consumed. Yet neither airlines norpilots have the freedom to choosethe most direct and economicalroute. This is because the Federal

Aviation Administration (FAA)mandates that airlines y indirectroutes. When existing regulationswere developed, it was deemednecessary to have a vast amount ofspace between airplanes. Radar andcomputer systems were incapableof providing pilots with sufcientinformation about other air trafc to

maintain safe distances and line-of-sight control procedures. The con-

sequent inefciencies delay planesand waste fuel. Allowing pilots toy more direct, free ight routes

would reduce greenhouse gas emis-sions. Such free ights would allowpilots to choose the most efcientight path given atmospheric condi-tions, trafc patterns and the like,

rather than having the FAA dictateeach planes ight pattern.74 Anaircraft could y anywhere as long

as it maintained a protected zoneof airspace and did not impingeupon the protected zone of anotheraircraft. Naturally, pilot exibilitywould be limited in high-trafcareas, such as John F. KennedyAirport in New York. According tothe FAA, free ight is possible only

with new ground- and air-basedcommunications, navigation, andsurveillance equipment, avionics

and decision support systems.

The airline industry supports freeight, and the impact on the envi-ronment would be tremendous:

Aircraft CO2

emissions would bereduced by an estimated 17 per-cent domestically and 12 percentabroad.

Insert callout here.Clunkers emit

most pollution from

automobiles.


20/32


20

A recent report estimated that im-plementing such a system wouldreduce U.S. oil consumption byas much as 400,000 barrels daily

by 2030.

75

Green Landings. Even withoutsignicant air trafc control (ATC)

reform, advanced technology couldpotentially save signicant amountsof fuel by allowing what have beentermed green landings. Tradi-tional landing approaches involvedescending in stages, often involv-ing throttling up the airplanesengines. Green landings, pioneered

by Swedish airline SAS and theirpartners at Stockholm Airport, in-volve signicant computer interac-tion between a landing aircraft andits destination airport. This interac-tion allows the airport to time thelanding to the second. As a resultthe plane can land with a single de-scent, saving large amounts of fuel.SAS estimates that up to 200 kg(440 lbs.) of fuel, and 300 kg (660

lbs.) of CO2 emissions can be savedon each ight as a result of moreefcient landing.76

Unfortunately, the FAA hasproven itself incapable of movingto free ight in a cost-effectiveor expeditious fashion. Privatizingthe air trafc control system wouldincrease the ability and incentiveof the air trafc control system to

adopt such reforms and increaseoverall efciency within the airtravel sector, as well as reducinggreenhouse gas emissions from airtravel. As the successful experienc-es with private air trafc control byCanada and New Zealand indicate,a privatized system will be able toact more rapidly in making deci-sions. It will acquire and implement

new technologies and proceduresthat increase the efciency of air

travel, thereby reducing greenhousegas emissions.


Policy? In addition to loweringgreenhouse gas emissions, thepolicy will have signicant eco-nomic benets. Delays and wasted

fuel cost airlines over $3 billion ayear, according to the FAAs ownestimates. It is much superior to thealternative that has been proposedto reduce greenhouse gas emissions

from ight: signicant reductionsin air travel. [See the side bar: ARegrettable Climate Change Policy:Limiting Air Travel.]

No. 9: Remove Regulatory

Barriers to Innovation

In competitive markets, com-panies and entrepreneurs are con-stantly seeking to reduce production

costs in order to achieve the samelevel of output with less energyand other inputs. This has reduced

energy use and greenhouse gasemissionsper unit of outputin theUnited States and other market-ori-ented countries.80 [See Figure V.]

For instance, while Russia pro-duces about $2 of GDP per kilo-gram of oil (or equivalent energy)

consumed, the United States pduces about $4.60 for the samamount of energy.

Germany produces $6.20 and

Italy produces $8.20 per unit energy consumed.

The overall average for the 15longstanding European Unioncountries is $6.60 of GDP perunit of energy.

In fact, the amount of energyconsumed per dollar of output hbeen falling in developed countrfor decades. Meanwhile, thesecountries have continued to growFor example:

From 1990 to 2006, while theUnited Kingdoms GDP rose 4percent, the energy consumedunit of output fell by 27 perce

In the United States, while theeconomy has grown more tha2,000 percent since 1910, foss

fuel use has increased only 60percent, while carbon emissioper capita did not even double

Between 2000 and 2006, whilU.S. per capita GDP grew fro$34,883 to $36,122, carbon intensity fell 2 percent each yea

Regulatory Barriers. Goverment regulations generally, and

environmental regulations in parular, often pose substantial barrito emissions-reducing innovatioMany efciency gains require threplacement of existing plant anequipment. A regulatory structuthat raises the cost of such capitainvestments will slow the rate ofmodernization. The EnvironmenLaw Institute (ELI) concluded th

Insert callout here.More direct air routes

would reduce aircraft

emissions.


21/32

he current environmental systemhas created signicant barriers tonnovation.84 By increasing theosts of modifying, enhancing or

eplacing older, dirtier facilitieswith newer, cleaner ones, the exist-ng pollution-control regime often

works at cross-purposes with thegoal of developing less-pollutingmodes of production.

Analyzing six specic industriesn the Great Lakes region, ELIound considerable specic regu-atory barriers to environmentalnnovation. For example, regula-

ions in the baked goods industryim to reduce ethanol emissions0 to 95 percent by requiring thenstallation of Reasonable Avail-ble Control Technology (RACT).

However, because of these regula-ions, the ELI found that promis-ng new technologies could not

obtain the eld testing required to

be eligible for RACT permits. As aesult, the ELI found, These barri-

rs combine to provide a monopolyposition for the catalytic oxidationechnology, which is the particularechnology that performed mostffectively when the regulations

were introduced. Thus, the regula-ions prevented the development of

potentially better alternatives.

In general, ELI found that pol-ution emission limits or discharge

tandards tend to be based on theEPAs determination of whichechnology will best achieve theequired emissions reductions.85

Once a technology is chosen as thepreferred pollution control method,here is substantially less incen-ive to introduce newer technolo-

gies or to switch to other energyources, even if they will improve

environmental performance.86 Forexample, in the 1960s and 1970s, asnational clean air laws were de-

veloped, the quickest, most effec-tive way to reduce pollution fromcoal-red power plants would have

been for government to determinethe level of pollution it felt wasprotective of public health and, aftersetting standards and a timetable,simply to have directed energycompanies to meet it.87 In thepursuit of prots, companies would

have sought out the most efcient,

least costly method or technology tomeet the required criteria. For mostexisting power plants, this wouldhave meant switching from high-sulfur, dirty Eastern coal to low-sulfur, cleaner Western coal.

But Congress did not take thispath. First, under pressure from thepower industry, Congress exempted

existing power plants from the newclean air standards. Second, un-der pressure from Eastern states

mining interests, Congress man-dated that a particular technology scrubbers be used to reduceemissions from new power plants.By scrubbing the post-combustionmix of gases and particulates beforeemitting them from smokestacks,power plants could continue to usedirtier coal from relatively populous

Eastern states with strong mining

labor unions. This made the manu-

facturers of the scrubber technologyhappy, but because Western mining

states have smaller populations, theyhad fewer legislators in the Houseof Representatives; thus Easterninterests dominated the debate.88

Politicians looked good: Theywere lauded for cleaning the airwhile saving jobs. But the envi-

Figure V

Energy Use per $ GDP

(GDP $ per kg/oil equivalent)

Source: World Bank, The Little Green Data Book 2007(Washington, DC: WorldBank, 2007). Available at http://siteresources.worldbank.org/ INT-DATASTA/64199955-1178226923002/21322619/LGDB2007.pdf.

Italy

$0.00 $2.00 $4.00 $6.00 $8.00

United Kingdom

EU-15 Average

Japan

Germany

France

United States

Canada

Russia

$8.20

$7.30

$6.60

$6.40

$6.20

$5.90

$4.60

$3.40

$2.00


22/32


22

ronment and the general publicsuffered. The costs of installingscrubbers was high, and in the earlyyears the scrubbers were prone to

failure which meant a waste oftime, manpower, money and re-sources used to manufacture them.These costs were usually passedon to ratepayers but sometimes togeneral taxpayers as well. Energycosts rose as a result. In addition,air quality improved at a slowerpace than it likely would have hadCongress simply set a standard andlet industry gure out the best

cheapest and most reliable wayto meet it. Existing power plantswere expanded and repaired, inmany cases keeping them runningdecades past their planned usefullife in order to avoid building moreexpensive plants which wouldalso have been more energy-ef-cient and cleaner.

Other researchers have alsoconcluded that technology-based

standards provide the weakest in-centives for both abatement tech-nology and output technology inno-vation.89 Indeed, regulated rmsmay fear that if they do develop acleaner technology, the performancestandard will be tightened.90 Thisprecludes the normal developmentand renement processes most tech-nologies need to achieve their bestperformance and, in many cases,

can limit permissible technologiesto a single one.91

In 1999, a Business Roundtablereport identied 21 discrete envi-ronmental regulatory or legisla-tive barriers to innovation.92 Forinstance, the federal governmentraised substantial barriers to theuse of cleaner alternative fuels,

including natural gas, hydropowerand syngas derived from bioslud-ges. According to the BusinessRoundtable, these barriers arise

from the multiple layers of permitreviews under the Clean Air Act[,]the Federal Energy RegulatoryCommissions (FERC) complicatedand lengthy hydropower licensingprocess[,]and the Resource Con-servation Recovery Acts (RCRA)Derived From rules for hazardouswastes.

In addition, the Business Round-table noted a variety of regulatoryobstacles to the development and

deployment of energy-efcienttechnologies. These included con-icting federal and state vehicle

emissions standards that impede thedevelopment of more energy-ef-cient engine technologies; technolo-gy-specic air quality standards thatresult in increased materials costs,waste and energy consumption;and antiquated building codes thatprohibit the use of building designs

that would conserve constructionmaterials and reduce heating re-quirements.

The Roundtable identied an-other 17 separate tax and tradepolicy barriers to innovation. Forexample, in the tax eld: A U.S.company transferring climate-related or other technology to its

foreign subsidiary must charge tsubsidiary an arms-length royalon which it then must pay taxes the U.S. Treasury even thoug

the environmental technology trferred represents a cost to the usand does not generate any incre-mental income. In other wordsthe U.S. Treasury uses the taxcode to charge companies for theprivilege of updating their factorsimply because those factories alocated abroad.

In the eld of trade, the Rounble identied signicant regulato

restrictions on technology trans-fer in addition to traditional tarifbarriers. It recommended reformof the Export Administration Acto establish procedures to ensurthat controls keep pace with rapichanging commercial technologand foreign competition and toensure a cost-benet analysis [iconducted before any new exporcontrol is imposed.

Procedures required by theEndangered Species Act and National Environmental Policy Actadd to these barriers, and politi-cians and even some governmenagencies have delayed the sitingsolar power collection facilities the Mojave Desert and other loctions.93 If solar power is to haveany role in the national energy menvironmental regulations shoulnot be used to prevent solar powarrays from being sited in the mobenecial locations.

Policy Recommendation. Curent regulatory barriers to innovtion should be reviewed. Manyregulations should be removedentirely. Others should be streamlined considerably. In general,


Tax, trade andenvironmental regulations

impede energy-saving

innovations.


23/32

nvironmental regulations, the taxode and trade regulations should

be amended so as not to provideperverse incentives against environ-

mental and energy innovation. Inddition, when examining presentegulations and proposing new onesntended to protect the environment

or public health, the federal gov-rnment should undertake a com-

prehensive review of the availablepeer-reviewed research, and thenimply set the standards to be metnd establish a timeline for meetinghem. This would allow entrepre-

neurs to discover the most efcient,ffective means of meeting thetandard.

Why Is This a No Regrets

Policy? Industrial regulation ispotential barrier rather than an

ncentive to emissions reduction.Freeing the market to allow innova-ion without penalty will spur tech-

nological development and reducemissions. This technology can

hen be transferred to other nationshrough development partnershipsllowed through relaxations in tradeegulation.

No. 10: Encourage

Breakthroughs in New

Technology

Energy use is the largest sourceof human greenhouse gas emis-ions. In the United States, CO

2

missions from transportation,lectric power, heating, cooking and

other energy uses account for 82percent of emissions.94

Petroleum used in transportationand industrial production ac-counts for 44 percent of energy-related CO

2emissions.

Coal accounts for 36 percent andnatural gas for 20 percent.

Thus, every proposal to reducegreenhouse gas emissions, whether

international or domestic, primarilyaims to restrict energy use throughregulations or by imposing higherenergy costs through increasedtaxes. These policies seek to reduceenergy use absolutely or to shift en-ergy production from fossil fuels tosources that emit less or no green-house gases.

Every credible cost analysis ofthese proposals shows that consum-

ers will pay more for energy, andthat employment, GDP and dispos-able household income will declinerelative to what they would be ab-sent the restrictions. For instance,a recent analysis by Charles RiverAssociates of the Obama Adminis-trations proposal to reduce carbonemissions estimates that if the planbecomes law, by 2025:95

The United States will suffer 3.2

million job losses;

Household purchasing power willdecline an average of $1,827;

U.S. GDP will be 0.7 percentlower than expected;

Motor fuel prices will rise 19percent;

Electric power prices will rise 44percent; and

Natural gas prices will rise 56

percent.

Other analyses of various cli-mate proposals result in similar costestimates.96

Despite these costs, the impacton atmospheric CO

2concentrations

would be minimal because devel-oping countries are projected toaccount for 85 percent of emissions

growth in the next two decades.Indeed, China has already surpassedthe United States as the worldslargest CO

2emitter.

Current Policy. Responding toenvironmental concerns, the federalgovernment currently promotes useof alternative fuels, such as corn-based ethanol for transportation andrenewable sources of electricity,primarily wind and solar power. Itis unclear whether corn-based etha-nol as a motor fuel actually reducesnet CO

2emissions.97 Certainly,

vehicles powered by electricity or

hydrogen fuel cells would signi-cantly reduce CO

2emissions. But

these vehicles fail when judgedon factors people consider whenpurchasing vehicles such as costs,reliability, comfort, ability to travellong-distances, towing and/or pas-senger capacity.

Using wind and solar technolo-gies for electric power productionis an intermittent and unreliableanswer. In the best locations, solar-and wind-powered generators onlysupply electricity 30 to 40 percentof the time. 98 Solar cells do notproduce power at night and onlydeliver reduced amounts of electric-ity on cloudy, rainy or otherwiseovercast days. Wind power issubject to wind speed and turbinescan malfunction or break. Withoutstorage technology, wind and solarpower sources must be backed upby traditional power plants us-ing fossil fuels, which operate onstandby to ll any gaps left by windand/or solar power.

Policy Recommendation. Sub-stantially reducing CO

2emissions

and meeting future energy demandswill require a revolution in trans-


24/32


24

portation and electric power tech-nologies.99 One way to encouragethe development of these technolo-gies is to introduce competition

by establishing an X prize-typecompetition for new technologiesin the elds of transportation andenergy use.

Past Trials and Successes. En-couraging private innovation andinvestment through monetary prizeshas led to signicant advancementsin technology. For example:

In 1996, Dr. Peter Diamandisstarted a monetary prize theAnsari X-Prize and competi-tion to create a private vehiclecapable of space ight, with thegoal of obtaining new low-costmethods of reaching orbit.

In 2004, aerospace engineer BurtRutan, funded by Microsoft co-founder Paul Allen, beat out 26other teams for the $10 millionprize.

Since then, other competitionshave been started:

Another X-Prize Foundationcompetition aims to create apassenger vehicle that gets theequivalent of 100 miles per gal-lon of gasoline.

Billionaire Richard Branson isoffering a $25 million dollarprize to anyone who can devise atechnology that can remove 1 bil-lion tons of CO

2or other green-

house gases per year for 10 years.

The Government and the X-Prize

Model. The federal governmentshould follow the X-Prize modeland support competitions that createvarious technologies that respond tothe twin goals of improving energy

use while reducing greenhouse gasemissions. The contests could aimto create technologies that rangefrom batteries that store power from

wind and solar facilities to afford-able vehicles powered by hydrogenfuel cells.

Contests such as the X-Prize le-verage investment that is oftenmuch greater than the amount ofthe prize awarded. In this case,the federal government wouldonly pay the winners when and ifthe goal is accomplished.

Competition and prizes spur in-novation and drive risk-taking by

entrepreneurial individuals. Evenif only one inventor or team takesthe prize, the multiple entries ina contest often result in a numberof unexpected and unconvention-al approaches to the goal, all ofwhich could be developed furtherafter the competition ends.

The competitive process oftenspeeds up the adoption of newtechnologies. As part of thecontest, winners could agree tolicense their innovations to thegovernment for transfer overseasto developing countries. Thishelps the government satisfy itscommitment to clean develop-ment and reduces emissions.

Instead of taxes, prizes could befunded out of revenues from new

oil and natural gas production inareas that are currently off-limitexploration and production. By recent estimate, oil production o

areas that are currently off limitspublic lands and on the outer-cotinental shelf could potentially to2.03 million barrels a day by 203with natural gas production amoing to more than 5.34 billion cubfeet per day. The total revenue fexpanded energy production coureach $1.7 trillion.100

In addition, new energy prodution increases Americas domes-

tic reserves of oil and reduces itsdependence on foreign oil and gsupplies. It would also create tenof thousands of additional jobs ashould reduce energy prices forconsumers.

Why Is This a No Regrets Po

icy? The X-Prize model for newenergy technology developmentwill help improve U.S. energy security and increase domestic ene

supplies, as new oil and gas eldare brought into production. Reenues from increased productionwill fund the development of netechnologies that will lessen Amcan dependence on fossil fuels.

Conclu

Iain Murray - 10 Cool Global Warming Policies

Documents

Transcript of Iain Murray - 10 Cool Global Warming Policies