James Pethokoukis

Politics and policy from inside Washington

On climate change, Romney is pretty consistent

Aug 25, 2011 16:49 UTC

What Mitt Romney is saying today about climate change is pretty much what he’s been saying all along. First, here is what he said yesterday:

Asked about global warming at a town hall meeting in Lebanon, New Hampshire, Romney said he believed the world is getting hotter and humans contribute in some way to the change — but could not judge to what extent. ”Do I think the world’s getting hotter? Yeah, I don’t know that but I think that it is,” he said. “I don’t know if it’s mostly caused by humans.”

“What I’m not willing to do is spend trillions of dollars on something I don’t know the answer to.”

In June, a day after launching his second bid for the White House, Romney caused a stir by saying he thought humans had contributed to climate change to some extent. At that time he made a call for a reduction of “emissions of pollutants and greenhouse gases that might be significant contributors” to climate change — a suggestion that was not made on Wednesday.

A Romney aide said the candidate has not altered his position on climate change.

Still, using additional domestic nuclear, natural gas, and other resources could have a side benefit of cutting carbon emissions, Romney said. “My view is pursue a strategy which gets us into energy independence which has as a byproduct it gets us into less CO2 emitting.”

He criticized a bill backed by President Barack Obama that would have capped carbon emissions and allowed polluters to buy and sell rights to emit carbon. ”I do not believe in cap and trade and I do not believe in putting a carbon cap” on polluting industries, Romney said.

In his book “No Apology,” Romney describes his position this way, far more directly:

I believe that climate change is occurring — the reduction in the size of global ice caps is hard to ignore. I also believe that human activity is a contributing factor. I am uncertain how much of the warming, however, is attributable to man and how much is attributable to factors out of our control. … Internationally, we should work to limit the increase in emissions in global greenhouse gases, but in doing so we shouldn’t put ourselves in a disadvantageous position that penalizes American jobs and economic growth.

Romney is clearly in favor of limiting carbon emissions — at least in theory — but does not want to cripple the U.S. economy or spend trillions of dollars for “extreme and expensive measures” like cap-and-trade to do it. He mentions the work of Danish economist Bjorn Lomborg who believes “addressing the remediation of the effects of global warming [is] far more economic and far more humane than massive spending to reduce emissions.”

Romney also spends considerable time in his book explaining the pros and cons of a carbon tax-payroll tax swap, a plan favored by economist and Romney adviser Greg Mankiw and many other Republican-leaning economists. Among the positives, he says:  1) revenue neutrality; 2) higher energy prices would encourage energy efficiency; 3) industry would have a predictable outlook for energy costs; 4) profit incentives rather than government  subsidies would encourage the development of “oil substitutes and carbon-reducing technologies.” And there is this:

Comparative analyses of the tax-swap plan with a cap-and-trade system have demonstrated that the tax swap is likely to be five times as effective in reducing carbon dioxide emissions and, presumably, five times as effective in reducing energy consumption.

Romney does add, however, that “a great deal of work needs remains to be done if it is to become a viable option.”

Bottom line: Romney wants to use markets and incentives to reduce carbon emissions and lower U.S. dependence on overseas oil, not net tax hikes or mandates or regulations. This is not the Rick Perry position, of course. So the issue marks an interesting contrast between the two candidates. Grover Norquist puts it this way: ”If Perry was president, one of the things I’d not worry about is a carbon tax. I’d worry about big spiders eating New Jersey first.”

COMMENT

Sounds like Mitt doesn’t know much period.

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Kudlow: Rising oil prices aren’t a big problem … yet

Mar 4, 2011 18:08 UTC

The Great One, Larry Kudlow, on the rise in oil prices:

In any event, I side with clear-eyed Wall Street forecaster John Ryding, who believes the $10 or so oil-price hike will reduce real growth by only one-quarter of a percent while adding a like amount to inflation. Ryding expects 3.5 percent growth this year.

Historically, a combination of spiking oil prices and an inverted Treasury yield curve signaling ultra-tight Fed money are precursors to inflationary recession. This has pretty much held true for the last six economic downturns. But right now, the oil spike is modest and Fed money printing is ultra-easy. The yield curve is steep and upward sloping, with long-term rates 350 basis points above short-term rates. This argues against recession right now.

And let’s not forget: Corporate profits remain very strong, an extension of the Bush tax cuts is helping the economy grow, and the one-time payroll tax cut may help cushion the oil shock. So at the moment, barring a blowup in Saudi Arabia, the economy will survive.

Of course, as Larry hints, the risk is if that $10 turns to a sustained $20 or $30. Then you are chopping a point off GDP growth, assuming a linear relationship between oil prices and GDP growth. At some point, that relationship breaks down and the damage being done gets far worse. The airline industry, for instance, does not seem to operate real well at $140 a barrel oil, as became clear in 2008. Even the current price levels are hitting profitability:

The airline industry will earn almost 50% less this year than in 2010, as fast-rising oil prices pummel the sector’s profitability.

The International Air Transport Association has now downgraded its airline industry outlook for this year to $8.6 billion from the $9.1 billion it estimated in December. This is a 46% drop in net profits compared to the $16 billion earned by the industry last year.

IATA raised its 2011 average oil price forecast to $96 per barrel for Brent crude, up from $84 in December. This will increase the industry fuel bill by $10 billion to a total of $166 billion.

A pro-market, not pro-business, energy strategy

Sep 27, 2010 19:06 UTC

Here is my Reuters Breakingviews piece from last week:

General Electric boss Jeffrey Immelt last Thursday castigated Washington for neglecting the U.S. energy industry, calling current policy “stupid.” Sure, Immelt was talking his own book — a third of GE’s profit last year came from its power unit. But the lack of a comprehensive energy strategy is still an economic drag.

Immelt was a big fan of President Barack Obama’s energy plan, which proposed a cap-and-trade system for reducing carbon emissions. The version of the Obama plan that died in the U.S. Senate also contained new incentives for nuclear power. Immelt, working hard to boost GE’s reactor business, would surely have welcomed those. So on one level, Immelt’s complaints are gripes from a CEO trying to boost his business.

But his critique goes further. The demise of the Obama plan — Republicans killed the bill by portraying it as an economy-crippling energy tax — left in place a policy vacuum. Immelt also lambasted the current patchwork U.S. regulatory structure as an 18th century relic that “has fundamentally no basis in the modern world.”

The lack of clarity in government policy has become a big concern for corporate America. One obvious example is the continued absence of a defined approach to pricing carbon. Despite faults including needless complexity, Obama’s cap-and-trade plan would have supplied that. Meanwhile, the volatility of oil prices already makes investments in fossil fuel-substitutes such a nuclear, solar and wind power risky enough, without further uncertainty over tax treatment and other government-influenced costs.

But Immelt should take heart. Although cap-and-trade is dead, the idea of a simple carbon tax with revenues used to reduce other taxes still has a pulse among both Democrats and Republicans. Even more likely, perhaps when Congress meets after the November congressional elections, is passage of a nationwide renewable energy standard. The law would require utilities across America to deliver 15 percent of their power from renewable sources, or by ramping up energy efficiency, by 2021. Currently standards vary state by state — exactly the sort of thing that irks Immelt.

But while an energy strategy should mean greater regulatory and pricing certainty, it should be not be a euphemism for massive government subsidies. That would merely reward effective lobbying by energy companies instead of market success. Immelt is right to expect a hand up — but not a handout.

Me: Certainly we don’t need a massive regulatory structure put in place, along with billions or hundreds of billion in subsidies.  I have an upcoming chat with Glenn Hubbard about his idea for a flexible carbon tax.

Drill, baby, drill — at least in some places

Mar 31, 2010 19:17 UTC

The new POTUS offshore drilling plan may be more aggravating for what it does not include (drilling in the Pacific, for instance) than pleasing for what it does. And as the Houston Chronicle points out:

But it is unlikely to win strong support from the fiercest drilling advocates in Congress and the energy industry, who have accused the administration of slow-walking conventional oil and gas production. They are expected to oppose many of the administration’s decisions — including the cancellation of planned lease sales in Alaska and potentially years-long waits before new drilling along the East Coast.

Me: And is it, along the WH nuke power plan, to make some version of cap-and-trade palatable? I don’t think it will be enough to get a comprehensive energy bill passed, Here is a bit from my RBV column today:

Even so, America will continue to be depend on imports to meet its vast energy needs. In the case of oil, nearly 60 percent of consumption is supplied internationally, including half from OPEC and a fifth from Canada. Similarly, Obama’s recent announcement of new loan guarantees for nuclear power plant construction is unlikely substantially change that sector’s share of the U.S. energy portfolio. But the White House hopes both efforts will help supply needed momentum to its energy and climate change agenda. Many Republicans and centrist Democrats favor an “all of the above” energy policy. Although a bill containing a nationwide cap-and–trade scheme for limiting carbon emissions passed the House, a parallel effort is dead in the Senate. Such caps are anathema to coal-state members of both parties.

COMMENT

More spin by Hussein. Puts this out there after the Public had been screaming for drilling all year, and he tried to sell Picken’s windmills and Gore’s Global Warming and knows all that stuff is decades away. Like his stimulus which he will claim is adding more jobs, he’ll take credit for the meager few Wells he will allow to be drilled. And speaking of seriously examining the sites for a year is another lie. The entire drilling map has been well documented for decades. Now with California bankrupt and sitting on top of capped oil wells, already dug , does he advocate taking off the caps and spreading the wealth ? When is America going to wise up to this fake ? The biggest scam to be hidden from the electorate , and one that would have made Barnham proud. There’s a Sucker born every minute “.. He never thought that America was a Nation of Suckers . But when he said it, America was full of Americans. Get ready, because Hussein is about to release an Amnesty bill that will unleash 30 million more illegals unto the ” Help Me ” rolls.

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