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The Demagogue Cycle of Energy

This Providence Journal editorial makes an important point:

Some politicians have been critical of National Grid for a proposed 19 percent increase in the electric bill for the typical residential user starting Oct. 1. It’s a frightening number, to be sure. The irony is, politicians have a greater influence over that number than the energy distribution company.

The proposed 19 percent — painful to Rhode Islanders and their economy, if approved by the state — is not a profit center for National Grid. It is the pass-through cost of energy. It gains the company nothing other than angry customers.

Of course, the utility doesn’t have to worry but so much about angering customers, given that it is a monopolistic utility.  But the key point is spot on:  Every year, politicians layer on new regulations that make energy more expensive and cave to activists who wish to prevent the development of any traditional energy sources.  As they drive up the price, it is that much easier to whip up anger at the messenger.

If one is inclined to ponder cui bono, this is an excellent topic.  And as the editorial notes, if one is inclined to ponder who doesn’t benefit, the answer is all of us.

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When a Billionaire’s Undemocratic Influence Doesn’t Matter

A commentary piece by Jason Hayes appearing in the Wall Street Journal last month provides an example of progressives’ not really caring about the influence of “millionaires and billionaires,” provided it’s in their favor:

Michigan’s two largest electricity companies struck a “breakthrough agreement” last month with billionaire California environmentalist Tom Steyer to boost the Wolverine State’s clean-energy requirements. Earlier this year, Mr. Steyer had funded a ballot initiative slated for August to force Michigan’s electricity providers to source 30% of their overall sales from renewable options such as wind and solar by 2030. But under the new agreement, the utilities will aim to produce a minimum 25% of their energy from renewable sources and a further 25% from energy-efficiency measures by that same year. This 50% green-energy goal will effectively govern the state’s energy policy for at least the next decade.

News of the deal between Mr. Steyer and the utilities— DTE Energy and Consumers Energy—has left many in Michigan wondering what happened to the established process for setting energy policy. The deal hasn’t been approved by state officials or voters. How is it possible that two utilities and a single special-interest group can independently agree to raise the state’s renewable energy mandate and get away with it?

Had the Koch Brothers made some arrangement with a state’s electric utilities to take up some policy that would have increased the costs of energy, progressives would have made it the subject of weeks of national outrage.  But here’s the key point:  Most conservatives would have joined them.

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Take Hodges Badge Departure as Another Warning Sign

As Democrat Governor Gina Raimondo spins Rhode Island’s economic numbers and the news media touts her “wooing” of blockchain companies, an article  from the Newport Daily News a couple of weeks ago hasn’t gotten much attention:

Hodges Badge Co. Inc. has made the “difficult decision” to close its Portsmouth plant this November and consolidate production at its Washington, Missouri, facility, according to a company statement.

“Hodges Badge Company Inc. is a 98-year-old family-owned company and we consider each one of our employees as part of our extended family,” according to the statement attributed to Rick Hodges, the company president and CEO. “We greatly appreciate being part of the Portsmouth community and are truly grateful to all the employees who contributed to our success over the past several decades. This is a necessary and critical economic decision that we do not take lightly, and we will be working with each of our employees to provide compensation packages and on-site outplacement services.”

The facility in Portsmouth opened in 1974 and employs around 92 people.  Rhode Island just won’t allow the company to justify keeping those jobs here.

To be sure, that’s not only a tax and regulation issue.  For Hodges Badge, energy played a big role, too:

Despite other business reforms aimed at reducing electricity costs, the plant still consumed 451,000 kilowatts of power for all of 2008 at a cost of $91,000, according to a Daily News article in July 2009. That was twice as much as the company paid to power its Missouri plant.

“I live here and I love it here, but how long can you realistically sustain that?” Rick Hodges said at that time.

Imagine how the current political landscape looks from that perspective.  The governor is touting more crony wind deals; NIMBYism is hindering an effort to increase power production in the state; and schemes to make energy more expensive through carbon taxing are a regular feature of every legislative session and may explode into law any year.

Rick Hodges was vocally against the toll on the Sakonnet River Bridge, and it can’t have been lost on him that tolls are proliferating in the state and could return at any time.  Add in the recent mandatory-sick-leave law and the push for extremely radical “equal pay” legislation.  At some point, business owners must tire of always feeling vulnerable.  Any given legislative session could be the end of their operations for some money grab or progressive identity politics impulse.

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When Problems Begin to Resolve Without Our Involvement

Glenn Reynolds sure does summarize the impression many of us have when we come across information like the United States’ having hit a seven-decade low, per capita, in carbon dioxide emissions, falling in absolute terms even as the rest of the world increases.  Writes Reynolds:

It doesn’t count if you get this result without expanding governmental power.

But it should.  Two problems arise, though.  The first is that, obviously, people who want to seize power through centralized government will look for reasons to do so, whether a foreign adversary, moral decay, or a changing environment.  A second is less blameworthy:  We tend to feel as if a problem has not been addressed unless somebody has addressed it.  If the problem seems to improve naturally, then that’s just the way it happened.

A challenge for conservative generally is that our proposed solutions most often have an element of letting problems fix themselves with a minimal nudge from us.

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When Blackouts Come, Will We Remember to Blame the Right People?

Valley Breeze publisher Tom Ward has an important warning related to the latest government-backed wind project in Rhode Island:

I’m OK with wind turbines miles offshore. But when the May 31 Journal story ran out of political high-fives and got to the end, it came to our daily reality. Wrote Alex Kuffner, “The price of power from the Revolution project is still uncertain.” Its cousin, the Block Island Wind Farm, “will ultimately cost ratepayers (that’s us!) hundreds of millions of dollars in above-market costs.”

One day later, an opinion column also appeared in the Journal, by Meredith Angwin, of Vermont, a physical chemistry researcher and pro-nuclear power advocate. The headline: “We’ll lose power in the winters ahead.” In it, she detailed the now well-known facts surrounding the coming closing of many of New England’s traditional electric plants. …

What I know with 100 percent certainly is this: If in eight years rolling blackouts come to New England during the winter, families who live here will have been put in danger by radical environmentalism and the politicians who practice that religion. Short-sighted decisions from a decade earlier will come home to roost as energy costs explode, children shiver, schools close, and businesses grind to a halt. Those who caused the problem will be long gone. Reasoned people need to demand predictable power today.

In too many areas, across too many levels of government, we’re simply failing to take the future into account.  The incentives of big government all but ensure that this will be so.  Our government is very skeptical about the goodness of people and our ability to guide our own lives, but it ought to be skeptical of its own ability to micromanage the universe.

Look to any socialist country to see what happens when the predictable consequences of big-government policies come to pass:  They scapegoat the people who are trying to keep things going, nonetheless, particularly those in industry, perpetuating a cycle.  We can already see the beginnings of this process with all of the ideological legislation that treats business owners as if they are morally suspicious characters.

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In Deep Water with Wind Company

Something feels both odd and not quite right about the fact that Democrat Governor Gina Raimondo is sending out fundraising appeals saying that “Gina can’t see this [new off-shore wind] project through without your support.”  So, if I give Raimondo the requested $10, is that going to keep her political career alive or is it going to facilitate a green energy project?  Should the governor be committing the state to long-term agreements with a private sector company that require the same governor to be reelected?

The whole thing is deeply strange.  A week ago, the Providence Journal announced that Rhode Island had “selected” Deepwater Wind to build a massive off-shore wind farm, but most Rhode Islanders probably didn’t even know we were even looking into the possibility.  As Alex Kuffner reports:

Although it was a Massachusetts process, a little-known clause in the the procurement rules allowed other states in the region to join in if they wanted to. Without making its intentions known publicly, Rhode Island acted on the clause.

Even Deepwater CEO Jeffrey Grybowski seemed surprised.

When last we heard about Deepwater’s “Revolution Wind” project, the company was promising all its jobs and economic development to the New Bedford area.  It looks like Massachusetts chose a different company, but Rhode Island was happy to take seconds.

Ideological disagreement with the governor aside, something just seems off about this whole thing.  A secret deal with a connected company materializes at the nth hour, and the governor starts fundraising off it immediately.  Forgive my cynicism, but it seems like more media attention might flow to this subject if it weren’t a Democrat governor and a fashionable “green energy” project.

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Conscientious Versus Issue-Conscious

I wouldn’t claim that I help this curve much, but it certainly has the ring of truth:

Do our behaviors really reflect our beliefs? New research suggests that, when it comes to climate change, the answer is no. And that goes for both skeptics and believers.

Participants in a year-long study who doubted the scientific consensus on the issue “opposed policy solutions,” but at the same time, they “were most likely to report engaging in individual-level, pro-environmental behaviors,” writes a research team led by University of Michigan psychologist Michael Hall.

Conversely, those who expressed the greatest belief in, and concern about, the warming environment “were most supportive of government climate policies, but least likely to report individual-level actions.”

This applies to other issues, like charity.  Big-government types who want to use tax dollars to solve every problem sometimes behave as if that’s their contribution, so they don’t have to use any of their own money additionally.

The central consideration, here, is probably that concern about an issue is a different thing from agreement with a certain approach to solving the problem (especially in the balance of other issues), and “conservatives” tend to be more comfortable with this distinction. The lesson of the above findings may not be that self-identified environmentalists are more likely to be hypocrites, but that people who are willing to take individual action are more likely to see that as a solution.

I do think, though, that there’s something to the idea of “moral licensing”:

Previous research has found doing something altruistic—even buying organic foods—gives us license to engage in selfish activity. We’ve “earned” points in our own mind. So if you’ve pledged some money to Greenpeace, you feel entitled to enjoying the convenience of a plastic bag.

(Via Eric Worrall.)

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Some Pointers for Whitehouse

Retired economics professor Dennis Sheehan had some excellent advice for Democrat U.S. Senator from Rhode Island Sheldon Whitehouse in a recent Newport Daily News:

In that spirit, let me offer Sen. Whitehouse some new ideas. First, stop calling people names. Reading the senator’s speeches, it is all too easy to find people referred to as “thugs,” “liars,” “flunkies,” and “stooges.” He has said “The fossil fuel industry, on the other hand, is neither honest nor decent.” Accusations like this make for good political theater – which might be the senator’s real purpose – but they don’t make for good discussions.

Second, end the hyperbole. As an example, in the Roll Call article, Sen. Whitehouse claims that “he sees weekly full-page ads in his local paper for services to protect homes from rising seas.” If the senator’s local paper is The Daily News, I have to say that I have never seen weekly full-page ads for such services. The National Oceanic and Atmospheric Administration prediction for Newport of a rise of 0.9 feet over 100 years might explain the lack of ads.

Third, rethink the “fossil fuel industry controls everyone” idea. …

One suspects Professor Sheehan is correct that political theater is more the Senator’s objective than actual action, which explains why he would persist with his hundreds of “Wake Up” speeches despite finding that they have little practical effect.

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Farmland Subsidies and a Bad Trade in the Economic Ecology

In late summer 2016, I looked into the state government’s program, then under development, to purchase farmland and distribute it to small-time farmers (see here and here).  Well, Jennifer McDermott reports for the Associated Press that the program is now getting underway, emphasizing that the “entrepreneurial” farmers can buy the property for about one-fifth of what the state pays.

The National Farmers Union knows of no other state that buys farmland to sell to farmers at less than market price. Other states give tax credits and loans to beginning farmers.

Though some critics say this is not the role of state government, Rhode Island sees it as a way to keep young entrepreneurs from moving to other states, where land may be cheaper. It also could attract other farmers to the state, though retaining farmers who already are here is the main goal and the selection process favors Rhode Island farmers.

These points don’t make sense.  If other states don’t offer these benefits, farmers won’t find much-cheaper land for quite some distance, creating a pretty high barrier in order to up and leave.

More importantly, allocating resources to this activity — not only in the purchase price, but in the effect of preventing more-efficient usage of the land — implicitly makes somebody else’s activity more difficult.  On the hill down which excrement rolls, that “somebody” is more likely to be some other variation of entrepreneur trying to scrape resources together.

To keep the boutique farmer, in other words the state government may ultimately (although invisibly) be dismissing the office-based innovator with some hot technology of the future.  Given the geography and soil of the area, such a trade means playing to the Ocean State’s weaknesses, not its strengths.

And farmers aside, which Rhode Islanders does this policy benefit?  I’d suggest that the answer is relatively wealthy people who like the aesthetics of having nearby farms and purchasing local produce.  Those are aesthetics that I share, but our community (and economy) would be much better served by having it expressed in actual prices for produce.  Subsidizing local farms to keep the prices down creates higher prices for something we can’t see.

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After the Green Charmer Moves On

Remember when Rhode Island helped get Deepwater Wind off the ground by forcing Rhode Island energy users to pay an artificially high price for its product, in the name of making the Ocean State “the Saudi Arabia of wind”?  We were supposedly taking the lead in an industry of the future and securing the “well-paying jobs” that Rhode Islanders deserved.

Well, at least we can say we kicked off a job bump in the larger region:

Deepwater Wind will assemble the wind turbine foundations for its Revolution Wind in Massachusetts, and it has identified three South Coast cities – New Bedford, Fall River and Somerset – as possible locations for this major fabrication activity, the company is announcing today. …

These commitments are in addition to Deepwater Wind’s previously announced plans to use the New BEdford Marine Commerce Terminal for significant construction and staging operations, and to pay $500,000 per year to the New Bedford Port Authority to use the facility.”

Businesses will go where it is in their immediate interest to go.  That’s just what the incentives dictate.  Rhode Island continues to attempt to use crony capitalism in order to avoid making the changes necessary to be a place that businesses find attractive without special incentives.  That will ultimately fail, because it drives away all businesses that do not receive the special deals, and it keeps those that do only as long as the subsidies keep coming… and aren’t exceeded by somebody else’s deal.

But improving Rhode Island’s business environment inherently requires reform of and risk to the insider system that has corrupted the state, so it’s not a realistic option.

(Via Ted Nesi.)

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Some Practical Calculations Applied to Climate Alarmism

Here’s an interesting alternative view to the usual alarmism about the climate. Manhattan Institute Senior Scholar Oren Cass looks at a few studies with implausible conclusions. One predicts Iceland and Mongolia as future economic powerhouses.  Here’s another interesting finding from a government agency:

One Environmental Protection Agency study estimates the potential increase in extreme-temperature deaths by looking at city-specific effects. It assumes that a day counting as unusually hot for some city in 2000 will cause a similar mortality increase in that city in 2100, even if climate change makes it no longer unusual.

The result is a projection that a hot day will kill massive numbers in Northern cities by 2100—though such temperatures are already routine at lower latitudes with no such ill effects. Pittsburgh’s extreme-temperature mortality rate is supposed to be 75 times as high in 2100 as that of Phoenix in 2000, though Pittsburgh will not be as hot then as Phoenix was a century earlier.

But if Pittsburgh’s climate steadily warms over the coming century, it will not react to a 100-degree day in 2100 the same way it did in 2000. Even if it didn’t warm, we should assume that economic and technological advancement will make the city and its residents more resilient to heat than they are today.

The absence of this sort of discussion is what makes many of us skeptical of alarmism.  There are many steps between “the planet is warming” and “you have to restrain your economy and give up your freedom,” but we’re typically told that there’s no time for all that stuff.

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The Backwards-Thinking Environmentalist

Is it just me, or does this sound like the sort of thing that Hollywood would put in the mouth of an unsophisticated rube standing in the way of progress?

“Our climate crisis is at such an advanced point that we can’t be developing new fossil fuel resources, especially in one of the wealthiest countries in the world that has the largest historical responsibility for causing climate change,” said nationally-known climate activist Tim DeChristopher, of Pawtucket. “All of our oil and gas needs to be kept in the ground and here in Rhode Island we’re going to make sure that happens.”

The logical fallacies and just plain thinking are bad enough.  The stage of climate change is an independent variable from developing new fossil fuels.  Indeed, at a certain point, it might be too late to stop calamity, meaning that the only way forward is rapid technological advancement powered by cheap fuel.

Similarly, the wealth of a nation has little bearing on its right to harvest fuel.  Indeed, environmentalists should account for the probability that the United States will extract fuel in a relatively environmentally friendly way, and with its produce driving down the price of fossil fuels worldwide, there is less incentive for the world’s truly bad actors to join the market.

But punctuating all DeChristopher’s bad thinking is this Luddite notion that the fuel must stay in the ground.  Does the superstitious bubba believe that Gaia will lash out in anger, like the goddess of nature in Disney’s Moana?

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Borrowing Money to Make Housing More Expensive

One can have real debates about the wisdom of driving up housing prices.  If you’re trying to get started in the state, high housing prices are a huge burden.  On the other hand, if you own property in Rhode Island, making property more scarce should drive up its value… at least until the inability of people to move around easily strangles the economy even more and reduces the reasons for living here in the first place.

That said, it’s worth pointing out that this sort of thing certainly plays a role:

The Rhode Island Department of Environmental Management announced Friday that 17 projects will receive matching grants to protect 889 acres of open space and farmland. The funding stems from the Green Economy Bond program, which was voters passed in 2016.

The initiative aims to invest $35 million to preserve open space, improve recreational facilities and clean up land and waterways.

So, taxpayers committed to spending money (with interest) on initiatives that will reduce the amount of buildable land, leaving hundreds of acres that do little for anybody who doesn’t have a lot of free time.  Sure, it sounds like a nice thing to do, but it would be less of a concern if we could be confident that people understood the economics involved.  The value of land is mainly helpful when one makes the decision to sell (and buy in a less-inflated market elsewhere); in the meantime, it primarily means higher property tax bills and pressure for more debt and state-level taxes to subsidize housing for those who can’t afford it.

One thing we can say for Rhode Island government:  It’s great at creating tax traps that drag the economy down in ways that aren’t easily traceable back to them, while they buy votes from special interests.

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Progressives and NIMBYs Raising Energy Rates

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Utilities Reducing Rates Around the Country Due to Tax Cut

Paul Bedard reports in the Washington Examiner that National Grid won’t be alone if it reduces rates to reflect its lower tax burden, owing to the GOP-Trump tax cut that has just gone into effect:

On the heels of companies dishing bonuses of up to $3,000 to over one million workers due to the anticipated benefit of President Trump’s tax reform victory, several major utilities have announced plans to cut rates in a consumer payback related to the lower taxes.

Energy suppliers like Washington’s Pepco, Baltimore Gas and Light, Pacific Power, Rocky Mountain Power and Commonwealth Edison said they plan to give hundreds of thousands of customers a rate cut due to the tax reform.

Again, lowering the cost of doing business lowers the prices that companies have to charge to cover operating expenses and achieve whatever profits they need, which contrary to popular progressive delusion, they can’t just arbitrarily collect.

On the same topic, I asked Lt. Governor Dan McKee’s office whether his call for lower utility rates means he supports the tax reduction.  Here’s the response:

Lt. Governor McKee has publicly voiced his concern with the tax bill. One of his major issues with the bill is that it gave the overwhelming amount of tax relief to a very small and select percentage of the population and particularly large corporations. Lt. Governor McKee will use the new law in any way possible to help Rhode Islanders. In that vein, he will continue to pursue the rollback of previously approved and pending National Grid rate increases and encourage others to do the same.

Political rhetoric notwithstanding, one suspects that the former mayor of Cumberland understands that tax cuts in a system in which a relatively small percentage of the population pays the majority of taxes will lead to disproportionate reductions for those who pay the most.  One also hopes that the lieutenant governor is cognizant of the fact that his latest initiative plans to take advantage of the relief given to a “large corporation.”

We can only shake our heads, though, that a politician who actually seeks to draw advantage from the effects of legislation from the opposite party seems so moderate.

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McKee Proves the Point on Corporate Tax Reform

Readers may have caught wind of the push — led by Democrat Lieutenant Governor Dan McKee — to pressure or force National Grid to lower its requested energy rates in response to presumably significant savings due to the tax reform passed by the Republican Congress and President Trump.  On WPRI, Ted Nesi reports that at least one Massachusetts energy provider is lowering rates “to pass along some of its millions of dollars in tax savings to customers”:

“Our neighbors in Massachusetts will be getting a break on their monthly electricity bills,” McKee said in a statement. “It’s time for Rhode Island to ask National Grid to use its corporate savings to lower rates in our state and provide much needed relief for local families and small businesses.”

Wherever one may fall on the spectrum of possibilities for pressuring or forcing companies to use their resources in certain ways, whether utilities or otherwise, doesn’t this episode pretty much reinforce the premise of corporate tax cuts?  When government imposes costs on businesses, they are ultimately passed along to consumers and the economy overall.

And by the way, when we periodically hear politicians attacking companies — as McKee has attacked National Grid in the past — shouldn’t they simultaneously seek to mitigate the various ways in which they, the politicians, push the companies to higher prices?  That would include not only taxes, but also regulations and other government programs, such as those proliferating in the name of environmentalism.  Or is government the only area in which there are no trade-offs?

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Bag Ban Mania Has Come to Tiverton

The activists are going town by town pushing fruitless plastic bag bans, and in Tiverton the debate raises more disturbing beliefs:

Hilton apparently believes that government’s providing educational services creates an excellent opportunity to manipulate children into conflict with their parents to advance a cause whenever a handful of elected officials agree with activists that the cause is righteous. While one would have to research how much class time must be devoted to an issue in order to turn children into a government youth corps, Tiverton parents might rightly wonder whether the school district’s academic results illustrate available slack in the school day. Just 28% of Tiverton high school students are proficient in math and fewer than half in reading. Perhaps indoctrination can wait until those results improve.

On the other hand, perhaps the school department could seize on the issue to provide practical lessons in math, science, and critical thinking.

The town administrator is warning of big spending increases next year, and this is what elected officials are spending their time on?

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