Saturday, March 17, 2012

16 December 2010 – An opportunity for empiricism


A quick follow-up to my message of earlier this week.  It looks like the U.S. may be on the cusp of an experiment likely to provide data to either validate or falsify the thesis I proposed, which is that there is a bi-directional causal correlation at the national level between carbon dioxide emissions and GDP.  Two developments this week - one in the lame-duck Congress, and another by an appellate court - could result, in the new year, in the imposition of the sort of emissions controls envisioned in the failed Waxman-Markey bill.

The first development is the proposal by Sen. Lindsey Graham (R-SC), as an action item for the incoming Congress, for the development of a clean energy standard (CES) designed to "reward nuclear and renewable power alike".[Note 1]  As you'll recall from Tuesday's message, most of America's electricity comes from coal-fired generating stations, and a growing amount is coming from combined-cycle gas-fired turbines.  Graham's CES is designed to reward non-carbon-emitting generators while penalizing carbon emitters.  In theory, "clean coal" and other "clean fossil fuel" generators would be included in the CES designation; but as "clean" is defined as "non-emitting", inclusion is dependent upon implementation by emitters of carbon capture and storage (CCS) technology, which has yet to be proven technologically feasible, let alone cost-effective.  Meanwhile, as I pointed out earlier this week, the "renewable" share of generation is unlikely to expand; solar photovoltaic power is statistically irrelevant; hydroelectric generation is maxed-out; and wind power requires massive government subsidies and conventional, which is to say fossil-fuelled, back-up generation to account for its unpredictability and low available capacity.  Meanwhile, the weight of nuclear industry regulation augurs against a rapid expansion of nuclear generating capacity sufficient to meet growing consumer demand, let alone to both meet growing demand AND replace extant fossil-fuelled generation capacity.  What Graham is proposing, in other words, amounts in practical terms to a legislative cap on the amount of electricity that can be produced using coal, petroleum and gas generation.

The second development was the decision by the U.S. Court of Appeals for the District of Columbia to deny a request for a stay of the coming into effect, on 2 January 2011, of new EPA regulations entitling the Environmental Protection Agency to write permits for power-generation facilities and other emitters of large quantities of greenhouse gases.  The power industry had sought injunctive relief on the grounds that regulation was unnecessary and prohibitively expensive, and would result in significant increases in the cost of generated electricity; the judges opined that the plaintiffs had "the harms they allege are certain, rather than speculative."[Note 2]

The Appeal Court's decision means that the EPA may implement its new regulatory protocols while the plaintiff's suit proceeds.  In addition to creating a new bureaucratic permitting process (the costs of which will naturally be passed on to consumers in the case of utilities, and taxpayers in general in the case of the EPA and state permitting authorities), the regulations allow state permit holders to charge graduated fees based on emission quantities, meaning that carbon (emissions of other GHGs are negligible) will become proportionally more expensive.  The regulations also allow permitting authorities to press for improved technology, giving generators a choice between costly emissions fees, or costly equipment upgrades (although, as noted above, upgrading to the point of obtaining exemption from the regulations is impossible, as the technology to eliminate carbon emissions from the fossil fuel-generation equation does not exist).

Either or both of these initiatives is likely to significantly increase the cost of generating electricity from fossil fuel sources which, as I noted earlier this week, is where about two-third's of America's generated electricity comes from, thereby constituting legislative/regulatory attempts to turn the crank on the emissions machine backwards.  The consequences of such attempts, if they are undertaken and if the controls imposed are significant, could end up providing us with useful empirical data in the form of impacts on GDP.

There is of course some doubt that either initiative will permanently come into effect.  It does not appear likely that Graham's proposal will find much traction with his Republican colleagues, while SCOTUS, in agreeing to take up the case of American Electric Power v. Connecticut, may at some point issue a ruling that may affect States' rights to use "federal public nuisance" law as a lever to regulate emissions (a similar case, North Carolina v. Tennessee Valley Authority, is also pending review by SCOTUS).[Note 3]  Incoming Republicans, meanwhile, have suggested that the House may initiate a review of, as they put it, the EPA's "economy-strangling regulations".[Note 4]  Any successful interference with the EPA's attempts to regulate GHG emissions would, of course, invalidate the experiment.

Interesting times.