May 01, 2009

By Vaclav Klaus

RealClearPolitics - link

PRAGUE — I am surprised at how so many people nowadays in Europe, the United States and elsewhere have come to support policies underpinned by hysteria over global warming, particularly cap-and-trade legislation to reduce greenhouse gas emissions and subsidies for “green” energy sources.

I am convinced that this is a misguided strategy — not only because of the uncertainty about the dangers that global warming might pose, but also because of the certainty of the damage that these proposed policies aimed at mitigation will impose.

I was invited to address this issue at a recent conference in Santa Barbara, Calif. My audience included business leaders who hoped to profit from cap-and-trade policies, subsidies for renewable energy and “green” jobs. My advice to them was to not get caught up in the hysteria.

Europe is several years ahead of the US in implementing policies intended to mitigate global warming. All of the European Union’s member countries have ratified the Kyoto Protocol and adopted a wide range of policies to lower their emissions and meet their Kyoto targets.

These policies include a cap-and-trade initiative known as the Emissions Trading Scheme, steep fuel taxes and ambitious programs to build windmills and other renewable energy projects. These policies were undertaken at a time when the EU economy was doing well and — one hopes — with full knowledge that they would have significant costs.

With the global financial crisis and the sudden economic downturn, two things are becoming clear. First, it will be difficult to afford these expensive new sources of energy. Second, energy rationing policies, like cap-and-trade, will be a permanent drag on economic activity. Ironically, emissions have not decreased as a result of these policies, but are doing so now as the world economy moves into recession.

This is not a surprise to someone like me, having been actively involved in my country’s transition from communism to a free society and market economy. The old, outmoded heavy industries that were the pride of our Communist regime were shut down — practically overnight — because they could not survive the opening of the economy. The result was a dramatic decline in CO2 emissions.

The secret behind the cut in emissions was economic decline. As the economies of the Czech Republic and other Central and Eastern European countries were rebuilt and began to grow again, emissions have naturally started to increase. It should be clear to everyone that there is a very strong correlation between economic growth and energy use.

So I am amazed to see people going along with the currently fashionable political argument that policies like cap-and-trade, government mandates and subsidies for renewable energy can actually benefit an economy. It is claimed that the government, working together with business, will create “a new energy economy,” that the businesses involved will profit and that everyone will be better off.

This is a fantasy. Cap-and-trade can only work by raising energy prices. Consumers who are forced to pay higher prices for energy will have less money to spend on other things. While the individual companies that provide the higher-priced “green” energy may do well, the net economic effect will be negative.

It is necessary to look at the bigger picture. Profits can be made when energy is rationed or subsidized, but only within an economy operating at lower, or even negative, growth rates. This means that over the longer term, everyone will be competing for a piece of a pie that is smaller than it would have been without energy rationing.

This does not auger well either for growth or for working our way out of today’s crisis.

Václav Klaus is president of the Czech Republic, which holds the presidency of the Council of Ministers of the European Union until June 2009. He is the author of “Blue Planet in Green Shackles — What Is Endangered: Climate or Freedom?”

Blowhards

The fabulous debate over wind power on Nantucket Sound.

Wall Street Journal - link

Jan 24, 2009

For all the hype about the Bush Administration’s oil-and-gas energy bias, one of its last official acts was to give the go-ahead to what could be America’s first offshore wind farm — thus enraging more than a few self-deputized environmentalists. Such are the ironies of the wilderness of mirrors known as the Cape Wind project.

For the last seven years and counting, the green entrepreneur Jim Gordon has been trying to build a fleet of wind turbines in federal waters near the upscale seascapes of Cape Cod, Martha’s Vineyard and Nantucket. The site seemed ideal, given the stiff ocean breezes and the eco-friendly politics in Massachusetts. The company says its 130 towers could meet 75% of the region’s electricity needs and reduce carbon emissions by some 734,000 tons every year.

The sort of people who can afford to use “summer” as a verb are in favor of all that. Completely in favor, really. But they did want to raise one quibble. Unfortunately, the wind farm would create “visual pollution” in Nantucket Sound, particularly the parts within sight of their beachfront vacation homes.

Mr. Gordon went ahead anyway, and the opposition rose to gale force. Supposedly the wind farm will lead to everything from the disruption of seabird habitats to “desecrating ancient American Native burial sites,” in the words of Glenn Wattley, the head of an antiwind outfit funded by the likes of Bunny Mellon. But what really upsets these well-to-do Don Quixotes is the thought of looking at windmills that would appear about as tall on the horizon as the thumbnail at the end of your outstretched arm.

Then there is the political saga, with the Kennedy family as the Hyannis Port Sopranos, supplying the muscle. While Ted Kennedy was castigating President Bush for destroying the environment, the Senator was working furiously behind the Congressional scenes to kill Cape Wind. He even had the inspiration of getting former GOP colleague Ted Stevens of Alaska to slip wording into a spending bill that would have handed a veto to then-Governor Mitt Romney, another aesthetically minded opponent. Robert Kennedy Jr., a Time magazine “hero of the planet,” tried to get the Sound designated as a national marine sanctuary to bar development.

Incredibly enough, this political sabotage has so far failed. And last week the Interior Department issued its long-awaited regulatory study, mostly finding “negligible” environmental impact — apart from a “moderate” impact on the scenery. If the Obama Administration signs off, construction could begin next year.

Mr. Kennedy blustered that the report was rushed out: amusing, considering it runs to 2,800 pages. Bill Delahunt, the windy Cape Democrat, also denounced the action as “a $2 billion project that depends on significant taxpayer subsidies while potentially doubling power costs for the region.”

Good to see the Congressman now recognizes the limitations of green tech, such as its tendency to boost consumer electricity prices — but his makeover as taxpayer champion is a bit belated. Green energy has been on the subsidy take for years, including in 2005 when Mr. Delahunt was calling for “an Apollo project for alternative energy sources, for hybrid engines, for biodiesel, for wind and solar and everything else.” The reality is that all such projects are only commercially viable because of political patronage.

Tufts economist Gilbert Metcalf ran the numbers and found that the effective tax rate for wind is minus-163.8%. In other words, every dollar a wind firm spends is subsidized to the tune of 64 cents from the government. The Energy Information Administration estimates that wind receives $23.37 in government benefits per megawatt hour — compared to, say, 44 cents for coal. Despite these taxpayer crutches, wind only provides a little under 1% of U.S. net electric generation.

We’d prefer an energy policy that allows markets to shape the sources that predominate — which would almost certainly put Cape Wind out of business. But President Obama seems determined to unload even more subsidies on green developers as he seeks to boost renewables to 10% of the U.S. electricity mix by the end of his first term and 25% by 2025; their share today is about 9% (5.8% of which is hydropower).

We wouldn’t be surprised to see the President’s green future wrestled to the ground by the likes of Mr. Delahunt, the Kennedys and other anticarbon Democrats. Environmentalists love the idea of milking Mother Nature for power, but they hate the hardware needed to make it work: huge windmills, acres of solar panels, high-voltage transmission lines to connect them to the places where people live. Of course, they still totally, absolutely, wholeheartedly support green energy — as long as it gets built where someone else goes yachting.