John Reilly’s April 14th letter to Rep. John Boehner (R-OH). Reilly explains that the GOP continues to misrepresent his study, which found that annual price for the average household for strong cap and trade would start at $65 in 2015, averaging “about $800″ through 2050.

Accusing Massachusetts Institute of Technology economist John Reilly of using “fuzzy math” and “fuzzy logic,” the Weekly Standard has further distorted an MIT study of the economics of carbon regulation. By making an economically unsupportable assumption, Weekly Standard editor John McCormack transforms a $3100 lie promulgated by House Republicans into a $3900 lie:

While $800 is significantly more than Reilly’s original estimate of $215 (not to mention more than Obama’s middle-class tax cut), it turns out that Reilly is still low-balling the cost of cap and trade by using some fuzzy logic. In reality, cap and trade could cost the average household more than $3,900 per year.

In reality, the energy economist from the Massachusetts Institute of Technology who co-authored the “Assessment of U.S. Cap-and-Trade Proposals” report does a better job of interpreting “reality” than McCormack. It’s McCormack’s logic that is “fuzzy.”

THE $3100 LIE

The MIT study estimates the average value of the carbon market over a thirty-five year period to be $366 billion per year. If you were to divide that value by the number of households in America, you get $3,128 per household. Asserting that the value of the market is equivalent to the economic cost of the policy – which one has to do to claim that the cost of cap and trade is $3100 per household — requires the assumption that this revenue stream magically disappears somewhere. Reilly attempted to explain this to the Weekly Standard:

It is not really a matter of returning it or not, no matter what happens this revenue gets recycled into the economy some way. In that regard, whether the money is specifically returned to households with a check that says “your share of GHG auction revenue”, used to cut someone’s taxes, used to pay for some government services that provide benefit to the public, or simply used to offset the deficit (therefore meaning lower government debt and lower taxes sometime in the future when that debt comes due) is largely irrelevant in the calculation of the “average” household. Each of those ways of using the revenue has different implications for specific households but the “average” affect is still the same.

For example: Exxon Mobil became the largest corporation in the world by raking in $442.9 billion in revenue in 2008, “costing” the average American household $3,785.

Is the existence of Exxon Mobil a $3,800 tax on American families? No, because most of its revenues are redistributed in the economy — as oil rig employment, petroleum products (which fuel transportation and trade), and of course, multimillion-dollar salaries for its top executives and massive profits for its shareholders.

THE $3900 LIE

The MIT study of the economic effects of cap and trade did estimate the “welfare cost” of the transition from an unsustainable pollution-based economy to a clean-energy economy. As Reilly explained to McCormack (to no avail), this “cost to the economy involves all those actions people have to take to reduce their use of fossil fuels or find ways to use them without releasing [greenhouse gases]“:

So that might involve spending money on insulating your home, or buying a more expensive hybrid vehicle to drive, or electric utilities substituting gas (or wind, nuclear, or solar) instead of coal in power generation, or industry investing in more efficient motors or production processes, etc. with all of these things ending up reflected in the costs of good and services in the economy.

The MIT study found that this “welfare cost” is tiny with respect to the size of the economy, even with strong reductions in global warming pollution and a very high price for carbon permits. The change in total welfare is less than one-tenth of one percent in 2015, never rising above two percent for the forty-year run of their model. Averaging out the “price” of a clean-energy economy versus the status quo over those forty years, Reilly found the cost for “the average household just in 2015 is about $80 per family, or $65 if more appropriately stated in present value terms,” and the “present value cost per average current household through 2050″ is “about $800.”

McCormack decided to add $3100 to $800 and get $3900, even though Reilly told him one has to assume the carbon market value gets flushed down the toilet:

If you took the revenue and flushed it down the toilet or burned it, the cost would then be the Republican estimate plus the cost I estimate. But that is quite unrealistic, as the auction revenue will be recycled into the economy some way.

Using McCormack’s logic, we could take our $3,800 Exxon Mobil “tax” and then add in, say the $855 per household per year spent on the war in Iraq (given a lowball estimate of $100 billion in total expenditures per year) as the welfare cost of the existence of Exxon Mobil. Adding $3785 to $855 returns a figure of $4640 per average household.

Saying “Exxon Mobil is a $4640 tax” would be silly and intellectually irresponsible. But that’s essentially what McCormack is doing, as is the once-respected Heritage Foundation, who is promoting McCormack’s nonsensical $3900 figure. Read more

Memo to Media:  The MIT study being used by opponents of the Waxman-Markey bill was published in April 2007 (see here). Needless to say, it doesn’t model the bill or any of its key provisions.

The author, MIT Professor John Reilly, explained to me today in an exclusive interview that “the Republican approach to estimating the cost of cap-and-trade is just wrong.” He said even “apart from the misrepresentation of the costs” by the GOP, “it is inappropriate to draw conclusions on the costs of Waxman-Markey” from a study published two years ago that doesn’t model key cost-containment provisions, such as the use of offsets! ["Inappropriate" is an academic term.  A better word might be "fraudulent."]

Prof. Reilly said that the Weekly Standard reporter “feigned stupidity” in an effort to elicit answers that could be taken out of context and misrepresented. Reilly called the analysis in the resulting article, “Fuzzy Math: According to an MIT study, cap and trade could cost the average household more than $3,900 per year” — now being cited by conservative blogs and politicians — “just silly” for reasons discussed below.

Reilly said that his study found the cost to a typical family in 2015 of $80 (in terms of reduced economic welfare).  And, as we’ll see, he overestimates the cost of CO2 prices by a factor of 2.5 times compared to what it is likely to be under the Waxman-Markey bill aka “The American Clean Energy and Security Act of 2009.”

Reilly confirmed that in his study, even with an 80% reduction in greenhouse gas emissions, GDP roughly quadruples by 2050 and that a reasonable estimate for the slight reduction in GDP growth from even that strong cap is 0.1% of GDP a year — one tenth of a penny on the dollar — which as I’ve noted is pretty much what every major study finds (see “Intro to climate economics“).  Since the MIT study is “inappropriate” to use for estimating costs from Waxman-Markey, the only credible analysis of the bill out there is EPA’s, which finds it “could make the median household … better off than they would be without the program.”

FRAUDULENT USE OF MIT STUDY TO PROJECT COSTS OF WAXMAN-MARKEY

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What’s the easiest way to deal with the intermittency of many renewable sources of energy?  Cheap storage.  And what form of storage is much cheaper and has a much higher round-trip efficiency than electric storage? Thermal storage.

That’s a key reason concentrated solar-thermal power (CSP) is a core climate solution.  It has the most potential of any zero-carbon electricity since it can most easily be integrated with thermal storage — technology that is available today, as made clear by this just announced 200-MW plant Albiasa Solar of Spain will build in Arizona:

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Congressman Joe Barton, born in Waco, Texas, is not the sharpest tack in the GOP bulletin board (see Rep. Barton: Climate change is ‘natural,’ humans should just ‘get shade’ “” invites ‘expert’ TVMOB (!) to testify).  But he still thinks he outsmarted our Nobel Prize winning energy Secretary yesterday.

[Extended pause for laughter.]

Obviously he didn’t — but I do think that Chu missed an opportunity to answer the standard denier question that Barton was really asking. The Hill‘s Twitter Room (!) reports in Tweets You Need to Read (!!):

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A new campaign to pass President Obama’s clean energy economy plan is launching today with the release of new national and local ads. The campaign, a joint venture of SEIU, League of Conservation Voters, MoveOn.org Political Action, VoteVets, Center for American Progress Action Fund, the Blue Green Alliance, Environmental Defense Fund and others, will be a coordinated effort to urge members of Congress on both sides of the aisle to pass President Obama’s green economic agenda.

The House Energy and Commerce Committee has taken up comprehensive clean energy legislation, the American Clean Energy and Security Act, that Obama administration officials praised in hearings yesterday. The committee will be voting on the legislation in the coming weeks.

The first ads released are from the League of Conservation Voters and MoveOn, sharing an optimistic vision of “clean energy jobs.” Local ads target members of the energy committee in key states, such as Rep. Mike Rogers (R-MI) and Rep. Charles A. Gonzalez (D-TX).

MoveOn’s “America Must Lead” (national):

ANNOUNCER: America must end our economic crisis and dependence on foreign oil. The answer: A clean energy jobs bill, which could create millions of American jobs. But if we don’t invest in American manufacturing, those jobs could go overseas.

OBAMA: I do not accept a future where the jobs and industries of tomorrow take root beyond our borders. And I know you don’t either.

ANNOUNCER: Make our energy clean. Make it in America.

Watch it:

League of Conservation Voters: “Tell Mike Rogers It’s Time to Start Believing in America Again” (local): Read more

Top Stories

While conservatives try to block energy and climate action in Washington, people in New York City and Boston are beginning to reap the benefits of a greener economy. In New York, Mayor Bloomberg’s office is proposing new efficiency standards for thousands of city buildings. The initiative would stimulate the city’s economy with almost $3 billion in private investment and create 2,000 green jobs by 2022.

Boston is benefiting from the Regional Greenhouse Gas Initiative, the northeast’s cap-and-trade program. Money is pouring in””$262 million for just 3 months of auctions””to state coffers, which fund job-training programs. Unemployed Bostonians are already training for high-paying jobs that will put them back to work, weatherizing the city’s buildings. This is exactly what a cap-and-trade system is designed to do: raise funds by putting a price on pollution, create green jobs with these funds, and use the new employment to increase energy efficiency. It’s brilliant! Now if only conservatives would take note.

First fruits of cap-and-trade

Some of the first workers on energy efficiency programs are now hitting the streets with salaries paid by the proceeds of the cap-and-trade program started by 10 Northeast States.

The cap-and-trade program, called the Regional Greenhouse Gas Initiative, is intended to force power producers in the northeastern states to cut greenhouse gas pollution by requiring them to buy allowances, which will shrink annually, to offset their emissions.

The first auctions of carbon dioxide allowances held in September, December and March produced $262 million for the programs, just the beginning of a steady stream of funds being funneled to the 10 participating states.

The states, in turn, have started distributing grants to utilities and organizations that will run the programs, which  have started hiring contractors like CSG to do the actual work.

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The greatest rhetorician in the English language died April 23, 1616.  He was baptised April 26, 1564.   “On the assumption that the baptism took place within a few days of birth, Shakespeare’s birthday is celebrated on 23rd April, which is the feast day of Saint George, Patron Saint of England.”

In honor of this day to remember the genius whose works have been reprinted more than that of any other single author, I am reprinting one of my old posts that highlight lessons we can still learn from him today:  Why scientists aren’t more persuasive, Part 2: Why deniers out-debate “smart talkers.”

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The NYT‘s Andy Revkin writes on his blog today:

In the spirit of accuracy and settling on a common lexicon for climate discourse, I’d like to propose that a certain bit of climate shorthand go away. It’s the tendency to discuss the climate issue in terms of “carbon emissions.”  Just doing a Google search of blogs, I found 322,963 hits for this phrase.

Here’s the problem. First, not all carbon-containing emissions exert a heat-trapping effect on the atmosphere. Carbon monoxide, or CO, for instance, is not a significant  greenhouse gas.

Second, and most important, not all greenhouse gases contain carbon!

….  It’s a small point. But clarity is important in this arena, where smoke and mirrors are so abundant. Can we start talking about “greenhouse gases,” or “heat-trapping substances” if including black carbon, which of course isn’t a gas?

What do you think?

You can probably guess what I think but here goes:

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In this sequel to Part 1, Bill Becker lays out some key goals and principles for a sustainable future.

We are on the edge of a carbon revolution. Everything is going to change. This will matter to you”¦ There is no high-carbon future.
- Peter Mandelson, Secretary of State for Business Enterprise and Regulatory Reform, Great Britain

When we give voice to our visions, we identify the destinations we want to move towards. And by describing the steps we can take, we prepare ourselves for action.
- Rob Hopkins, The Transition Handbook.

In many ways, the future is an intensely personal thing. Every person, family, neighborhood, community and region is unique. A one-size-fits all plan for progress would be profoundly unsatisfying. It would impoverish us culturally by stifling invention and ignoring the richness of our diversity.

But what if the many communities engaged in envisioning America’s future, and the many organizations helping them, rallied around a common set of criteria for the society we must build for the 21^st century? Not a common blueprint, mind you, but common goals that must be met society-wide if we are to successfully survive the economic, climate and energy crises?

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