In Part 1, Dan Weiss explained why the “new” study by The National Association of Manufacturers and the American Council for Capital Formation on the Lieberman-Warner Climate bill is just a rehashing of the analyses of the Clean Air Act sulfur trading program that were proven wrong by reality, which is to say by the ingenuity and technology of entrepreneurs.

I have some further comments, since ACCF is one of the leading oil-industry-funded denier/delayer groups, since the economic model they use is the same one that the Energy Information Administration (EIA) has used over to make one wrong-headed prediction after another, since NAM/ACCF misrepresent their own study’s results — and since I otherwise needlessly suffered through the NAM/ACCF press call this morning.

Let me start by making this post useful for readers who already know this study is bunk by strongly recommending a terrific website that allows you to do your own economic analysis of greenhouse gas mitigation. The website, “See for Yourself,” is based on the work of one of very best economists in this area, Robert Repetto, who showed that the economic models used in the climate debate give different results primarily because of the assumptions they make in seven different areas.

NAM/ACCF use the EIA’s National Energy Modeling System” (NEMS). That should be reason enough to ignore it. Let me make four points about NEMS:

1. I’m not sure the EIA has ever made an accurate long-term prediction using this model. Certainly if you go back a mere 2 years, their projection for the price of oil today is off by a factor of two. But for as long as anyone can remember, they have incorrectly projected oil and gas prices, among others things. If you look up the saying, “Never right, never in doubt,” they have a link to EIA.
2. NEMS typically makes the most pessimistic assumptions in each of the areas analyzed by Repetto.
3. When I was at the DOE, the engineers and analysts in my office were so distressed at how EIA modeled energy efficiency and renewable energy technologies, we convened numerous meetings to try to get them to change. We didn’t succeed. What kinds of things do they do? Well, when NEMS was showing much more wind generation coming online then the EIA thought reasonable, they just went back inside the model and artificially capped the amount of wind generation possible.
4. To see what others think about NEMS, google “EIA NEMS flaws” [not in quotes].

I would call NEMS “pseudo-economics,” but I think that is redundant.

As for the NAM/ACCF study, it is strictly garbage in garbage out. On the press call, we learned the “model calculates the [carbon] price needed to force down US energy use.” Energy efficiency? Fuggeddaboutit. NEMS is a “no pain, no gain” approach, as I pointed out earlier in a post on the EIA’s own dubious modeling of the costs of meeting Kyoto.

We also learned the study built in “realistic assumptions about how quickly we will have new technology and nuclear power.” I kid you not. If you think “$1.6 million in ExxonMobil funding since 1998 = realistic assumptions” then I have some carbon dioxide offsets to sell you for $228/ton ($836/ton of carbon!) — the “low cost” estimate of the model for 2030.

Fundamentally, the study tells you what greenhouse gas mitigation would cost if your two mains strategies for reducing emissions were a high carbon price and lots of nuclear power. Think of it as modeling Sen. McCain’s approach to climate.

Even so, the study summary makes the same old typically misleading statements about the results:

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The National Association of Manufacturers and the American Council for Capital Formation today released their latest effort to frighten the American people and their representatives in Congress for acting meaningfully to combat global warming. The NAM/ACCF report, titled “Analysis of The Lieberman-Warner Climate Security Act (S. 2191),” unsurprisingly predicts that the Climate Security Act would lead to higher electric rates, loss of jobs, high allowance prices, and other economic harms.

This study is nothing more than a bad rerun of long ago predictions about acid rain controls that proved false. Twenty years ago, these same predictions were made by industry and the Environmental Protection Agency about the then controversial proposed acid rain control program. None of these predictions came true. After enactment of the acid rain program in 1990, electricity prices went down (in constant dollars), not up.

In fact, electricity prices are lower today than they were in 1990, even after implementation of three rounds of controls on sulfur dioxide from power plants. Although there were some coal mining job loses, EPA found that by 2010 “95 percent of the decline [in mining jobs] is expected to be due to productivity gain and only 5 percent of the loss in jobs (4,100) is expected to be attributable to Title IV [acid rain program].”

The acid rain program was the first big cap-and-trade program, and EPA predicted that the price of sulfur allowances would be $750 per ton. Actual price: less than $200 per ton under the original program. Why were these models wrong? Because none of these models can account for innovation spurred by putting a price on pollution emissions that were formally free.

Once managers and engineers have binding targets and firm deadlines, they are able to meet the standards for much less than the predicted amount. The NAM/ACCF study suffers from the same inherent flaw. It is a static guess about a dynamic and unpredictable economy. The NAM/ACCF study will be as wrong now as the acid rain studies were then.

Daniel J. Weiss is a Senior Fellow and Director of Climate Strategy at the Center for American Progress. To learn more about the Center’s energy proposals please see the Energy and the Environment page of our website.

If you’ve seen the movie Who Killed the Electric Car? (which is ranked #8 at Netflix in documentary rentals), then you know the EV story up to 2003. What you might not know is that one of the players in the movie, the California Air Resources Board (CARB), looks like it is up to no good again.

In killing Battery Electric Vehicles (BEVs) the first time, they put off progress on this front for a decade. Now they are preparing, at their March 27th meeting, to kill BEVs a second time, and probably waste another decade. We don’t have another decade. In Part 2 you will find information on what you can do to let CARB know what you think.

This post provides background on the CARB’s sorry zero-emission vehicle (ZEV) legacy. For background on BEVs, PHEVs (plug-in hybrid EVs), and FCVs (fuel cell vehicles) see Joe’s January post Plug-in hybrids and electric cars a core climate solution, nationally and globally. The major automakers are likely to produce plug-in hybrids on their own, but not ZEVs, and yet eventually we want ZEVs to be a part of the fleet to get the greenhouse gas reduction necessary in 2050.

Back in 1990, to help fix chronic unhealthy air in California cities, CARB required that by 1998 2% of California new vehicle sales have zero emissions. Zero Emission Vehicles (ZEVs) were then supposed to reach 3% by 2001, and 10% by 2003, and it was presumed that ZEV meant BEV. In 1996, under automaker pressure, CARB removed the 2% and 3% requirements, but left the 10% goal in place. It also allowed low emission vehicles (misleadingly called Partial ZEVs or PZEVs) to substitute for some ZEVs.

In 2001 they tinkered again and added a new category, Advanced Technology (AT) PZEVs, which are essentially hybrids. They also changed the 10% goal to 2% ZEVs, 2% AT PZEVs, and 6% PZEVs. The program began to resemble a Rube Goldberg contraption at this point, with gold, silver, and bronze categories. The program complexity has continued to grow since.

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