Thursday, February 14, 2008
On Thursday, Senator Inhofe introduced legislation to provide technical corrections to the Clean Air Act’s Renewable Fuels Standard (RFS) as mandated by the Energy Independence and Security Act of 2007. Senator Inhofe’s bill recognizes the delicate political balance surrounding the RFS and provides simple fixes that are intended to provide flexibility for the fuels industry in meeting these mandates.
My bill is a measured response to the overly aggressive bio-fuels increase mandated by the Energy Independence and Security Act of 2007 passed in December. The energy bill’s mandates allow no room for error in a fuels industry already constrained by tight supplies, full capacity, environmental regulation, and volatile market conditions.
“This technical corrections bill is not an effort to substantively overhaul the RFS program but rather is an attempt to smooth its unintended consequences. Recognizing the delicate political balance surrounding RFS, these simple fixes are intended to provide flexibility for the fuels industry in meeting these mandates.
“As Ranking Member on the Environment and Public Works Committee I did not support the 2007 energy bill. The enactment of these technical corrections would not change my overall opposition to the current flaws enacted to the RFS program, but my bill does make this new RFS less onerous.”
The EPW Committee has principle jurisdiction over motor fuels policy including renewable fuels. Senator Inhofe, as chairman of the Senate Environment and Public Works Committee in 2005, worked successfully with his colleagues to create a comprehensive program to promote the use of renewable fuels in the United States in an achievable, measured and economic manner. The Reliable Fuels Act was ultimately incorporated into the Energy Policy Act of 2005 (EPACT). Further, the EPW Committee has held at least 13 hearings on the RFS program, most recently an oversight hearing in September 2006 which highlighted the implementation of this new federal RFS program.
Floor Statement by Senator Inhofe
Introducing the Technical Corrections to the Clean Air Act’s Renewable Fuels Standard
February 14, 2008
Today I rise to introduce the Technical Corrections to the Clean Air Act’s Renewable Fuels Standard. This bill is a measured response to the overly aggressive bio-fuels increase mandated by the Energy Independence and Security Act of 2007 passed in December. The energy bill’s mandates allow no room for error in a fuels industry already constrained by tight supplies, full capacity, environmental regulation, and volatile market conditions. This technical corrections bill is not an effort to substantively overhaul the RFS program but rather is an attempt to smooth its unintended consequences. Recognizing the delicate political balance surrounding RFS, these simple fixes are intended to provide flexibility for the fuels industry in meeting these mandates. As Ranking Member on the Environment and Public Works Committee I did not support the 2007 energy bill. The enactment of these technical corrections would not change my overall opposition to the current flaws enacted to the RFS program, but my bill does make this new RFS less onerous.
The first correction to the Clean Air Act’s Renewable Fuels Standard allows a carryover of ethanol credits. This improvement does nothing to change the currently mandated numbers. Rather, it provides flexibility to an industry facing many uncertainties. In 2007, the industry used approximately 2 billion gallons of ethanol over and above the necessary levels prescribed in the Energy Policy Act of 2005 (EPACT). However, EPACT language and EPA rulemaking do not allow for two year consecutive “carryover” of credits. This means that although the industry has exceeded the 2007 requirements, they would be unable to apply these credits after 12 months. My bill would accommodate the uncertain levels of production from year to year. Considering the myriad variables involved in the ethanol production process including crop yields, land use, and feed stock prices, it only makes sense to allow more flexibility.
Another fix extends the small refinery exemption by two years. This language also does nothing to change mandated levels. A small refinery produces less than 75,000 barrels average daily aggregate and EPACT exempts these facilities from the renewable fuels numbers until 2011. These refineries are dealing with drastically smaller economies of scale in production. In order to protect these refineries from potential economic hardship and subsequent job loss, this exemption should be extended from the year 2011 to 2013.
I am hopeful that my colleagues in the Senate will join me and quickly pass the bill I am introducing today.
I yield the floor.
Thursday, February 14, 2008
The Congressional Budget Office (CBO) released a report on February 13 showing that carbon taxes are the “most efficient” way to regulate CO2 emissions and “could offer significant advantages” over the cap-and-trade approach. Senator Inhofe made the following comments on the report:
“This groundbreaking CBO report validates what I have been saying all along: Cap-and-trade approaches are the wrong way to go,” Senator Inhofe said. “The report is unequivocal in finding that cap-and-trade approaches are inefficient compared to a straightforward tax. The report reveals that no matter how a cap-and-trade approach is modified, on a ton-for-ton basis of emission reductions, it is worse for the American economy.
“In 2007, the EPW Committee conducted approximately 20 climate hearings on the alleged impacts of climate change and zero on examining which approach would least impact the American public financially. If we are going to impose enormous costs to our economy, a carbon tax would be a much more efficient and transparent approach. While I do not support either a tax or a cap-and-trade approach, I do strongly believe that we should be having an honest debate.
“This CBO report is consistent with previous analysis stating that a cap-and-trade approach would be far more burdensome than a straight forward tax. A November 2007 report from the Energy Information Administration (EIA) revealed carbon mandates will further drive up energy costs for already overburdened consumers. A separate November 2007 report from the CBO warned energy "price increases would disproportionately affect people at the lower end of the income scale" and said a tax on emissions "is generally the more efficient approach" than a cap-and-trade system. (LINK)
“Not only is the entire cap-and-trade approach fatally flawed, a cost-benefit analysis of the upcoming Lieberman-Warner cap-and-trade bill reveals it is simply all economic pain for no climate gain. Numerous analyses have placed the costs at trillions of dollars. Even if you accept the dire claims of man-made global warming, this bill would not have a measurable impact on the climate.”
Key quotes from new CBO Report: “Policy Options for Reducing CO2 Emissions (February 13, 2008)
According to the CBO report, a carbon tax "would provide firms with an incentive to undertake more emission reductions when the cost of doing so was relatively low and allow them to reduce emissions less when the cost of doing so was particularly high."
The CBO report noted “a tax would keep the costs of emission reductions in balance with the anticipated benefits, whereas a cap would not.”
“A tax on emissions would be the most efficient incentive-based option for reducing emissions and could be relatively easy to implement.”
“A cap that is too tight will disproportionately increase costs over benefits and a cap that is not tight enough will disproportionately lower costs relative to benefits. A tax, by contrast, will tend to hold the costs of emission reductions in line with the constant (although uncertain) expected benefits, encouraging greater emission reductions when costs are low and allowing more emissions when costs are high.”
“When analysts take into account the degree to which costs are likely to vary around a single best estimate, they conclude that a tax could offer much higher net benefits than a cap. One study suggests that the net benefits of a worldwide tax on CO2 emissions in 2010 would be more than eight times larger than those of an equivalent inflexible cap.”
“Viewed another way, any long term emission-reduction target could be met by a tax at a fraction of the cost of an inflexible cap-and-trade program.”
“A tax would provide a steady, predictable price from emissions. An inflexible cap, however, could result in volatile allowance prices, making a cap-and-trade program more disruptive to the economy than a tax would be.”
“Price volatility could be particularly problematic with CO2 allowances because fossil fuels play such an important role in the U.S. economy. They accounted for 85 percent of the energy consumed in the United States in 2006. CO2 allowance prices could affect energy prices, inflation rates, and the value of imports and exports. Volatile allowance prices could have disruptive effects on markets for energy and energy-intensive goods and services and make investment planning difficult. The smoother price path offered by a CO2 tax would better enable firms to plan for investments in capital equipment that would reduce CO2 emissions (for example, by increasing efficiency or using low-carbon fuels) and could provide a more certain price signal for firms considering investing in the development of new emission-reduction technologies.”
Thursday, February 14, 2008
I appreciate you holding today’s legislative hearing on S.1499. But I question the need for your bill. I appreciate that California has severe air pollution problems, and that the State has had little success in providing its citizens air that is healthy to breathe. But this debate seems like others where dirty air parts of the country try to impose draconian rules on the rest of the country to help spread the costs of cleaning its own air. Make no mistake – that is exactly what this bill does. It forces ports with clean air to comply with rules that are needed for dirty ports.
I prefer a simpler approach – areas with dirty air that violate the Clean Air Act should clean up their air. That is why I introduced legislation last Congress to significantly raise penalties in the dirtiest areas of the country to encourage them to obey the law. If they did that, fewer people would die from air pollution. It’s that simple. This bill takes the approach of penalizing clean ports to ease the economic burden on dirty ports. This turns the idea of State’s rights on its head.
The fact is that this law is bad for the U.S. It hurts our international competitiveness by raising the costs of exporting goods – regardless of whether those goods are shipped on U.S. or foreign vessels. The fact is that this is a global issue and the executive branch is now negotiating a global approach. Moreover, the international marine emissions agreement (MARPOL Annex VI) prohibits unilateral action, so this could conflict with any international approach, making it inappropriate for Congress to enact this bill.
I find it ironic that this Committee has spent so much time dealing with legislation to reduce greenhouse gases and then we would consider a bill that, according to the IMO Secretary General, could result in increased carbon dioxide emissions due to investments abroad in new refining equipment.
Madame Chairman, the United States is making significant progress in addressing this issue and its actions will help clean dirty ports worldwide, but in a comprehensive manner that will not unduly penalize clean ports in our country. I would conclude by quoting the phrase “Think globally, act locally.” Madame Chairman, I would hope areas such Los Angeles with horrible air pollution problems would begin acting locally and not interfere with efforts to address this issue globally.
Thursday, February 14, 2008
During today’s EPW Committee legislative hearing on the Marine Vessel Emissions Reduction Act of 2007 (S.1499), Chairman Boxer quoted from a letter in support of her bill by The National Association of Clean Air Agencies (formerly STAPPA and ALAPCO) purporting that the association speaks for all fifty states. Senator Boxer said at the hearing that it’s important to “take a close look at this letter” because the group “represents every state in the union.” Yet a closer look at the group reveals the claim that they represent all 50 states is simply false.
FACT: This association and its predecessors (STAPPA and ALAPCO) have a long history of speaking for a minority of States and refusing to make their decisions and votes publicly available. In the past they have had a minority of states present for votes, a vote on a position not be unanimous, and then try and speak on behalf of all fifty states.
Wednesday, February 13, 2008
Link to Inhofe EPW Press Blog: www.epw.senate.gov/inhofeblog
Today, February 13, 2008, the Wall Street Journal, in their editorial “Greenhouse Affect,” weighs in on two new studies that raise serious concerns about the impact of biofuels on the environment. Once again, the WSJ takes Congress to task for rushing through an Energy bill with a massive biofuels mandate increase last year. Last Friday, February 8, 2008, we posted a blog titled New Studies Raise More Concern over Dramatic RFS Increase Passed by Congress in 2007 on these new studies and addressed the failure of the EPW Committee to conduct any oversight of the RFS program, let alone consider the substantial increase included in the Energy bill Congress passed in December 2007. Hearings would have provided the opportunity for diverse interests to discuss the possible consequences of the drastic increase, from rising prices of food in our grocery stores to harm to the environment.
The WSJ editorial concludes by pointing out the role of environmental groups in the biofuels debate, calling their tactics “bait-and-switch.” The editorial states:
“Yet special blame also belongs to the environmentalists, who are engaged in a grand bait-and-switch. They stir up a panic about global warming, and Washington responds to the political incentives. Then those policies don't work and the greens immediately begin pushing a new substitute, whose outcomes and costs are equally uncertain. But somehow, that never seems to discredit the entire enterprise and taxpayers keep footing the subsidy bill. Our guess is that these new revelations will also be ignored. They're too embarrassing.”
As to the role environmentalists played during last year’s Energy bill, it’s particularly interesting to see in the comments made now by these groups about how Congress “blew it” when it comes to the substantial increase of the mandate. While environmental groups are right to say they had serious questions about the increase, and made their position known, these vocal critics turned silent once the bill passed the Senate Energy Committee. We noted in our blog post from June 2007 titled “Vocal Critics Turned Silent”:“Last month on May 1, 2007, the Senate Energy and Natural Resources Committee considered energy legislation sponsored by Chairman Jeff Bingaman (D-N.M.) and Ranking Member Pete Domenici (R-N.M.). So-called environmental groups came out publicly opposing the bill and sent a letter to the Energy Committee urging members on the committee to vote against it. Despite their opposition, the bill passed. Two weeks later, Senate Majority Leader Harry Reid (D-NV) incorporated the bill that passed out of Energy Committee into a broader energy package now being considered on the Senate Floor. As a result, the language that offended these groups remains the same, but the sponsor – from Bingaman to Majority Leader Reid - has changed. With that change the critics have now gone silent…Surprisingly – or perhaps not that surprising – once the majority leader’s name was added to the bill, the one-time vocal critics went silent. If these groups have integrity and act on their claims of speaking for the environment and the public, their opposition should become even more vocal.”
THE WALL STREET JOURNAL
February 13, 2008
The ink is still moist on Capitol Hill's latest energy bill and, as if on cue, a scientific avalanche is demolishing its assumptions. To wit, trendy climate-change policies like ethanol and other biofuels are actually worse for the environment than fossil fuels. Then again, Washington's energy neuroses are more political than practical, so it's easy for the Solons and greens to ignore what would usually be called evidence.
The rebukes arrive via two new studies in Science, a peer-reviewed journal not known for right-wing proclivities. The first, by ecologists at Princeton and the Woods Hole Research Center, reviews the environmental consequences of increased biofuel consumption, which had never been examined comprehensively. Of course, that didn't stop Congress and the Bush Administration from jacking up the U.S. mandate to 36 billion gallons by 2022, a fivefold increase from a mere two years ago. Such policies are supposedly justified because corn-based ethanol and other "alternatives" result in (very modest) reductions in greenhouse-gas emissions when mixed with gasoline.
The researchers break new ground by exposing a kind of mega-accounting error: Prior studies had never credited the carbon-dioxide emissions that arise when virgin forests, grasslands and the like are cleared to grow biofuel feedstocks. About 2.7 times more carbon is stored in terrestrial soils and plant material than in the atmosphere, and this carbon is released when these areas are cleared (often by burning) and the soil is tilled. Compounding problems is the loss of "carbon sinks" that absorb atmospheric CO2 in the bargain. Previous projections had also ignored the second-order effects of transferring normal farm land to biofuels, which exerts world-wide pressure on land use.
So, incredibly, when the hidden costs of conversion are included, greenhouse-gas emissions from corn ethanol over the next 30 years will be twice as high as from regular gasoline. In the long term, it will take 167 years before the reduction in carbon emissions from using ethanol "pays back" the carbon released by land-use change. As they say, it's not easy being green.
The second study comes out of the University of Minnesota and the Nature Conservancy and explores what the authors call the "carbon debt" when native ecosystems are converted to biofuel stock. Until the debt is repaid, biofuels from those fields will be greater net emitters than the fossil fuels they replace. The authors find that the debt for corn ethanol in the U.S. is between 48 and 93 years. In Indonesia and Malaysia, which have a 1.5% annual rate of deforestation to produce palm oil for Western European biodiesel, the debt is as high as 423 years. Yep, that's four centuries. Even Fidel Castro won't last that long.
If all this doesn't lead to a great awakening among policy makers, we don't know what will. The studies are even more damning because they examine the issue with the theories of the global warmists and conclude that biofuels actually exacerbate the problem they're supposed to solve. On top of that, they're creating new environmental troubles like deforestation and a reduction in biodiversity that may be worse over time than whatever the importance of observed climate change. In either case, or both, they're damaging the planet more than they're helping it.
Ethanol and biofuel proponents always point out that current options are little more than placeholders, temporary fixes until the technology advances and "second-generation" options emerge: "It's just around the corner," we're told. "No, really, this time it's real." That's why the Congressional energy bill put a cap on corn ethanol and, with lavish subsidies and tax credits, essentially legislated the creation of a speculative new biofuel industry from scratch. One hitch is that the technology never seems to turn that corner. Another is that, as the blockbuster Science studies imply, the unintended consequences of such divination matter more than the self-congratulation that "doing something" provides.
Yet special blame also belongs to the environmentalists, who are engaged in a grand bait-and-switch. They stir up a panic about global warming, and Washington responds to the political incentives. Then those policies don't work and the greens immediately begin pushing a new substitute, whose outcomes and costs are equally uncertain. But somehow, that never seems to discredit the entire enterprise and taxpayers keep footing the subsidy bill. Our guess is that these new revelations will also be ignored. They're too embarrassing.
Friday, February 15, 2008
Link to Article (Subscription Required)
Ben Geman, Greenwire senior reporter
HOUSTON -- Former Federal Reserve Chairman Alan Greenspan warned that cutting emissions of heat-trapping greenhouse gases under a cap-and-trade scheme could hurt the U.S. economy and put people out of work...
And while many presume that technological advances can address global warming, he said the evidence is mixed. "It is a much more difficult problem than we like to talk about politically," he said...
The chairman of the Federal Reserve from 1987 until 2006, Greenspan is widely seen as one of the world's most influential voices on economic matters.
Asked whether the U.S. economy is in a recession or close to it, Greenspan replied, "We are clearly on the edge. It is 50 percent or better."
High oil prices are a burden, he said, but the economy has proven resilient in the face of rising energy costs. He said it is "quite remarkable" the economy is able to do "reasonably well" with oil prices above $90 a barrel...
Greenspan also endorsed increased use of nuclear power to address climate change despite concerns about managing waste. "The way that makes the most sense and, ultimately, I truly believe that what is going to happen is a very substantially larger nuclear base," he said.