Ethanol Subsidy Needs to Go. Now.

Another black eye for the Environmental Protection Agency. The news out of Washington, D.C., is that our EPA has denied a request to waive ethanol mandates while the heartland recovers from a terrible drought, and consumers’ wallets seek relief from high food prices. Via the Detroit News (H/T Drudge Report):

The Environmental Protection Agency on Friday rejected a request from eight governors and nearly 200 members of Congress to waive requirements for the use of corn-based ethanol in gasoline, after last summer’s severe drought wilted much of the nation’s corn crop.

Later in the same article, Michal Rosenoer with Friends of the Earth offers his assessment of EPA’s decision:

“If the worst U.S. drought in more than 50 years and skyrocketing food prices are not enough to make EPA act, it falls to Congress to provide relief from our senseless federal support for corn ethanol,” [Rosenoer] said.

“The Renewable Fuel Standard is a broken policy — rather than giving us clean energy, it’s incentivizing biofuels like corn ethanol that are exacerbating our economic and environmental problems.

“Congress needs to cut corn ethanol from the RFS entirely to protect the economy and the environment from this destructive and dirty fuel.”

Michal Rosenoer is dead on. Washington does a lot of dumb things, but few things are as transparently stupid as the huge subsidy and fuel mandates for ethanol. If I may, I’d like to offer a few points of my own against ethanol:

(1) Ethanol is a waste of energy. Literally. Ethanol supporters can argue all they want, but the science is clear that ethanol is a net-energy loser, and therefore an environmental loser. This fantastic 2005 Slate article on ethanol highlights the relevant arguments (edited for length):

The stickiest question about ethanol is this: Does making alcohol from grain or plant waste really create any new energy?

The answer, of course, depends upon whom you ask. The ethanol lobby claims there’s a 30 percent net gain in BTUs from ethanol made from corn.

But the ethanol critics have shown that the industry calculations are bogus. David Pimentel, a professor of ecology at Cornell University who has been studying grain alcohol for 20 years, and Tad Patzek, an engineering professor at the University of California, Berkeley, co-wrote a recent report that estimates that making ethanol from corn requires 29 percent more fossil energy than the ethanol fuel itself actually contains.

The two scientists calculated all the fuel inputs for ethanol production—from the diesel fuel for the tractor planting the corn, to the fertilizer put in the field, to the energy needed at the processing plant—and found that ethanol is a net energy-loser. According to their calculations, ethanol contains about 76,000 BTUs per gallon, but producing that ethanol from corn takes about 98,000 BTUs. For comparison, a gallon of gasoline contains about 116,000 BTUs per gallon. But making that gallon of gas—from drilling the well, to transportation, through refining—requires around 22,000 BTUs.

I can’t say it any clearer myself.

(2) Ethanol harms fuel economy. Because ethanol puts out less energy than gasoline, ethanol blends harm your vehicle’s fuel efficiency. What sense then is raising CAFE standards? Another environmental loss.

(3) It’s all political. If Iowa did not have 6 votes in the Electoral College, the ethanol subsidy would not exist. The farm lobby would either split on the subsidy (corn for/livestock against), or oppose it as it is so narrowly focused. Party politicians support the subsidy because you can’t win the presidency without Iowa. Hell, you can barely win your party’s nomination without Iowa.

(4) Ethanol is starving people. Not only are we converting an important food crop to fuel, the subsidy and artificial demand created by government ethanol requirements results in additional acreage being converted from food crops, like wheat and soybeans, to corn for ethanol.

I could go on. Really. But let’s end with this: Ethanol fails every environmental, agricultural, and geopolitical (it doesn’t make a dent in our reliance on foreign oil) test to which it is put. It is a $6 billion a year waste of good money. The only test ethanol passes is the political test. Well, maybe it’s time to start flunking the test-takers.


In Tuesday’s Election, Environmentalists Paid to Play

The Missoulian’s Mike Dennison provides analysis of the U.S. Senate race in Montana between republican Dennis Rehberg and incumbent democrat Senator Jon Tester. This race was expected to go the republican’s way only to see Tester reelected with a comfortable 16,600 vote margin. Dennison gives us some idea of who helped to push Tester over the top:

As for the ground game, which identifies and registers sympathetic voters and then gets them to the polls, Montana Democrats and their allies had a good one.

The League of Conservation Voters, one of the nation’s most prominent environmental groups, spent $1.45 million on Tester’s behalf, including door-to-door canvassers, mailers and phone calls to get out the vote.

It’s hard to beat the democrats’ ground game. The LCV was all over Montana, knocking on doors and working the phone banks in behalf of Tester and other democratic candidates. And it looks like Montana wasn’t the only place where national environmental groups played a big role. Here’s today’s Washington Post:

The environmental community scored a string of successes Tuesday in New Mexico, Montana, Texas and other states, winning seven of eight targeted Senate races and at least three targeted House races. Although plenty of outside groups poured money into these contests, even some representatives of the fossil-fuel industry said that environmentalists had invested their resources wisely in 2012.

“There is evidence that the environmentalists have become a more mature political force,” said Scott H. Segal, who lobbies for utility companies at the firm Bracewell & Giuliani.

“Environmentalist spending was up considerably this cycle, and they seemed to resist the frequent trap of supporting third-party or crank candidates in ways that would have siphoned off votes from mainstream Democrats,” Segal said.

The League of Conservation Voters spent more than $14 million this year, more than it had in the past three election cycles combined, and groups including the Sierra Club, National Wildlife Federation Action Fund, Defenders of Wildlife Action Committee, Environment America and Natural Resources Defense Council Action Fund also devoted money and volunteers to key contests.

The environmental community went all in for this election. How will all this support be repayed?

Some environmentalists say the election provides a mandate for aggressive action on climate change, although oil and gas industry officials warned against over-interpreting the results because the economy ranked as the dominant issue this year.

The environmental community, having done its job to get democrats elected across the country, will expect action from the Obama Administration on a range of environmental issues, including rules to control mercury and greenhouse gas emissions, reign in oil and gas drilling on public lands, and tackle the fracking issue. Of course, I’ve recommended a number of items the President could add to his environmental agenda. It could be an interesting four years for the environment.

Hurricane Sandy Brings Toxic Sludge

Via Drudge Report, news that one of America’s most extensively contaminated water bodies is flooding. The New York Observer has a story short on information and long on photos. It’s not a pretty sight:

Flooding in the canal is troubling as its a superfund site that is home to extensive industrial activity and has a long, well-deserved reputation as a hotbed of toxic sludge and pollutants. The Environmental Protection Agency describes the canal as “one of the nation’s most extensively contaminated water bodies.”

If this is the worst news to come out of Hurricane Sandy, we will be very fortunate indeed. I have no doubt that every significant storm leaves behind an environmental mess, mostly due to the flooding of sewage and waste treatment systems and generally the washing of all the detritus of human activity into the ocean.

Congratulations. You’ve Pissed Me Off.

This news from my former stomping grounds in Page, Ariz. is just lovely: High mercury lands Lake Powell fish on food alert list. From the Salt Lake Tribune:

Striped bass from the southern reaches of Lake Powell, along with largemouth bass in Quail Creek Reservoir, have joined the list of Utah fish with mercury consumption advisories.

“We thought it was time to get the message out to people,” Amy Dickey of the Utah Division of Water Quality told the Statewide Mercury Work Group on Thursday, noting that methylmercury levels in Lake Powell’s stripers have hovered around the worrisome zone for several years.

With this first mercury warning for Lake Powell, one of the state’s most popular recreation spots, officials suggest pregnant women and children under 6 should eat no more than one 4-ounce serving per month.

Yes, just the pregnant women and children need to worry. Very comforting. Please tell me more:

“We’re not saying: don’t eat these fish,” he [Roger Wilson, Utah Division of Wildlife Resources] said. “We’re saying: eat according to the guidelines that have been issued” and that are kept up-to-date on the state’s mercury web page.

“Mind the eating guidelines” they say. For fresh caught fish, from a fresh water lake, with some of the cleanest water in the nation – other than the damn mercury, of course.

I lived beneath the stacks of the Navajo Generating Station for three years; I studied that coal-fired power plant like one would a painting. I looked at it from every angle – the poverty ridden Navajo who were employed by it, the environmentalists who despised it, the rural economy and downstream power consumers who depend on it. I could see the NGS plant, with all its ugliness and efficiency and necessity, from every perspective, and whenever I felt a little holier-than-thou about an environmental issue somewhere across the globe, I would stop and consider the complexities of NGS, and understand that the answers, while often clear to me, are far from simple to live by.

But Lake Powell is my lake. I spent three years working there as a park service employee, caring for that place, protecting it, promoting it, and deeply appreciating all my colleagues who were doing the same.

And now I feel betrayed.

Mercury Emissions and Cost-Benefit Analysis: My Final Say

On Tuesday I wrote about EPA’s new mercury emissions rule, and lamented the state of our discourse on environmental issues. I followed that post with a discussion of the appropriate role for economic analysis in environmental regulations. Today I want to bring our mercury discussion to a conclusion and offer a critical view of cost-benefit analysis (CBA), provide an alternative economic rational for pricing externalities, and close with an appeal to ethics-based decision making.

In environmental and health regulations, CBA assigns monetary values to human life and health so that the benefits and costs can be compared. A major flaw in CBA is the methods used to determine these values.

Because there is no market for human health and happiness – one cannot buy the right to a life – CBA attempts to determine these values by asking individuals what they would be willing to pay to remain healthy and free from harm. CBA then aggregates these values to determine what society is willing to pay for the benefits of environmental protection.

But relying on any individual to accurately respond to scenarios in which he attempts to value his life in monetary terms is a deeply flawed analytical approach. Bias is unavoidable (based on income, background, education and so on), and it is deeply suspect that an individual is capable under a hypothetical situation to value her own life. Consider just two scenarios: ask me to value my health and I may give you a dollar value (as an experiment); ask me what my family’s health is worth, and how much I’d pay to keep them from getting sick, and I’ll punch you in the nose. Second, ask me how much I’d be willing to pay to remain healthy after I am diagnosed with leukemia. I believe you’d receive a dramatically different response.

Further, these questions about pollution and risk are societal decisions, not individual decisions. Asking an individual what she would pay to keep herself free from harm is much different than asking what she would pay to keep society from harm, or what she thinks society could afford to prevent harm. The scale is vastly different between the individual, with her limited means, and society as a collective, and I suspect that an individual would be willing for society to pay a great deal more to keep all members healthy.

So the values that CBA assigns to the “benefits” of environmental protection are derived from what I and many others argue are deeply flawed methods.

Another critical error I see in the CBA analysis of the mercury rule is that its proponents fail to understand that opportunity costs cut both ways. This is an alternative perspective on CBA that I haven’t seen elsewhere. Consider: We have allowed a major industry to free-ride for at least 50 or 60 years, since we first realized that mercury emissions were accumulating in the environment and causing harm. During this time, industry has not had to pay the true costs associated with their economic activities. We know there is a cost to mercury emissions, because we are arguing about it now. Take that cost and apply it retroactively for five decades.

The problem with free-riding goes beyond the failure to recognize and collect the costs associated with industry’s negative externalities. The real issue is foregone opportunity costs and the misallocation of resources. The coal-fired power industry has operated under unfair market conditions for decades. By not paying the true costs associated with their activities, they have operated in a subsidized environment, and on an unlevel playing field. Let me ask: if for the past 50 years electricity from coal was priced to include the costs of its resulting pollution, what would the energy market look like today? Would the market price of coal have been sufficiently higher to allow competing industries to arise? Would the curve of technological development and innovation in alternative energy sources bent sharply upward? What competing industries may have arisen to challenge coal and to provide substitute means of energy production?

All the mercury rule does is correct a major market failure: Government is finally requiring the coal-fired power industry to account for the costs of the negative externalities associated with their activities. And still industry gets a free ride: No one is accounting for the costs to mitigate the damage already done to the environment and public health.

Lost in the debate on EPA’s mercury rule is any discussion of our ethical obligations as a society to the well-being of ours and future generations. Here we are at Free the Commons! writing three posts on CBA because economics and electricity costs are the dominant focus of the mercury debate, overriding all other considerations. Economic analysis has a role – an important role – in helping the public and our decision-makers understand choices between competing policies and options. But economic analysis should never have been afforded the role it plays today of primary determinant in what is and is not acceptable environmental policy. Economic analysis has distracted us from our responsibilities as adults, as members of a community, as caretakers and stewards of the environment. And our continued shortsightedness will cost us far more than we gain if we fail to recognize the need – not economic choice, but need – for a healthy, unimpaired, and productive environment.

More on Mercury Emissions and Economic Analysis

After blogging last night about EPA’s mercury emissions rule, I spent today reading about cost-benefit analysis as an approach to evaluating environmental regulations. I’m a fiscal conservative, but also a dedicated conservationist. As an undergraduate, I took every Econ class I could to boost my GPA. I understand cost-benefit analysis, and I understand economics. More importantly, I understand opportunity costs.

Cost-benefit analysis is meaningless unless one understands opportunity costs. After all, the argument isn’t really about whether something costs too much compared to the benefits received. The real argument is the trade-offs one must make when one decides to ‘purchase’ one thing rather than another thing, such as mercury free emissions rather than ‘insert your favorite good or service here’. What critics of the EPA’s mercury rule are really arguing is that there are better uses of the money that the rule would force us to spend.

To this end, those who place monetary values on human well-being and life are not monsters. They are providing a valuable service, an ethical service even, to the public and decision-makers. Consider this scenario: We’re told that the mercury emissions rule will cost $XX, and that this is too much money for $X benefit in sickness averted or lives saved. But the true value in cost-benefit analysis is to show that for those $XX spent on mercury emissions reductions that only save $X in human welfare, we could turn around and spend those $XX monies on items or services that maybe provide $XXX in human welfare.

I’m not a fool. I served my time in politics (and I’m sure I will again). I understand the motivations of those who are making these arguments about the costs and benefits of the mercury rule. Most of this is not altruism. But I think we need to separate the wheat from the chaff, so to speak, and understand there is value to economic analysis and economic measures assigned to environmental regulations, even to those regulations which protect human health and save human lives.

We need to understand that budgets are real, both at the government/societal level, and at the individual level, and we need to recognize that regulations carry costs. We need to understand that to do one thing may preclude the opportunity to do another more productive or valuable thing with our financial resources. We need to recognize that economics, at its heart, is the art of balancing finite resources against infinite wants and needs. Desire always outweighs the pocketbook. This is a fact, a truism, and it’s not wrong to apply economics to environmental policy.

Now, having written all of that, I’ll offer a follow-up post on why the cost-benefit analysis offered for the mercury rule is bunk. Stay tuned…

To Emit or Not to Emit: Mercury is the Question

Rarely is an example of moral clarity so perfectly presented as is the EPA’s new mercury emissions rule. Following 20 years of study, the EPA finally has established controls over mercury emissions from coal-fired power plants. This new rule, the MATS rule for Mercury and Air Toxics Standards (aka the Hazardous Air Pollution Rule), is being discussed only in the periphery of the presidential campaign as part of the “War on Coal.” But the discussion to be found in newspapers, blog posts, and political circles is so void of any recognizable ethical framework that I struggle even to bring an ethical case to the issue.

The MATS rule has been in the planning stages since the 1990 Clean Air Act (CAA) Amendments, when President G.W.H. Bush gave EPA authority to regulate sources of mercury emissions. The EPA tackled two of the largest sources of emissions – municipal waste disposal and medical waste incineration – and brought total mercury emissions down by 45 percent. But coal-fired power plants, the largest remaining source, responsible for 50 percent of total mercury emissions, escaped regulation while the EPA conducted extensive studies.

But no longer. The EPA’s MATS rule will take effect in 2015, and will require emission controls on power plants that EPA estimates will reduce mercury emissions by 90 percent. The rule is not without costs: the estimates, which are all over the place, generally say that MATS will be the most expensive rule ever written for power plants.

Predictably, given the ethical state in which we find ourselves, costs have become the focus of the debate over MATS. According to EPA’s math, the benefits due to reductions in illness and death far exceed the rule’s costs. Industry is saying that the rule will force the retirement of 20 percent of our power plants, and will drive up electricity costs for consumers while decreasing the availability and reliability of remaining electricity generation. The costs, up to $10 billion a year, are not worth the benefits, detractors say:

“Governor Romney has made clear that he opposes the Utility MACT, which costs more than $1,500 for every one dollar reduction in mercury pollution,” Romney spokesperson Andrea Saul said in a statement.

Such is the state of our moral confusion: The entire debate about mercury – a known toxin (in the form of methylmercury) in the environment – is being fought on the balance sheet. Do the costs outweigh the benefits, and by benefits they mean the price tag they put on human health and lives. We never stop to consider whether our lifestyle, based on cheap electricity, is worth the destruction to our environment and the damage to our health.We never once ask whether we should be pumping mercury into the atmosphere, whether this is the behavior of an ethical society.

I want to go back to Mitt Romney for a moment. The man is not unethical; he has a moral compass. Consider the following response he gave in his first presidential debate:

Good. I’m glad you raised that, and it’s a — it’s a critical issue. I think it’s not just an economic issue, I think it’s a moral issue. I think it’s, frankly, not moral for my generation to keep spending massively more than we take in, knowing those burdens are going to be passed on to the next generation and they’re going to be paying the interest and the principal all their lives. And the amount of debt we’re adding, at a trillion a year, is simply not moral.

This was Romney’s response to a question about our federal debt, and it is a response I, as the father of two young children, wholeheartedly share. But under what ethical paradigm do we live in which we cringe at our moral failings to control the debt, but blithely skip past our moral obligations to control toxic pollutants? Is the dumping of debt onto our children any different than the dumping of toxins into the atmosphere and our nation’s lakes and streams? Should we not leave to our heirs a nation unfouled by both a crushing debt burden, and an environment laden with pollutants? I think it is far past time that we as a nation add environmental quality to the housing of our moral compass.