Heritage economist David Kreutzer

In a new blog post, the Koch-fueled Heritage Foundation continues to defend the fossil fuel industry at the expense of American jobs. Heritage attacked Environmental Protection Agency administrator Lisa Jackson for testifying that stronger limits on dangerous air pollution could create over a million jobs. Her testimony was based on a study by the University of Massachusetts Political Economy Research Institute (PERI), which found that electric utilities would create 300,000 jobs (or 1.5 million job-years over five years) as they clean up aging, polluting power plants. The PERI report used figures from a study by Charles River Associates for utility giant Exelon, which found that “EPA air regulations can be implemented without adversely impacting electric system reliability.” The proposed transport rule would save up to 36,000 lives a year, worth hundreds of billions of dollars in health and welfare. Heritage’s David Kreutzer, on the other hand, argues the higher health standards are bad because “these regulations increase energy costs“:

On Wednesday, Environmental Protection Agency (EPA) head Lisa Jackson quoted this study to support her assertions the EPA regulations are net job creators. Under this logic, all regulations that have compliance costs create jobs. The PERI study claims that EPA regulations will add nearly 1.5 million jobs over the next five years (Note: They have completely confused a job and a job-year, which multiplies the errors in their results.) However, because these regulations increase energy costs, they cut consumers’ income while raising manufacturers’ costs of production. The net effect is both job and income losses.

Kreutzer, a “global cooling” fantasist, also fears renewable electricity standards and carbon pollution markets.

Kreutzer’s argument boils down to the idea that a perfectly efficient economy will suffer if businesses — like electric utilities — are forced by burdensome regulations to make needless expenditures, taking money away from other sectors. Although that may be an economics-101 level understanding of the world, it’s certainly not sufficient to come anywhere close to reality. The Bush deregulation economy collapsed in 2008, creating not just massive unemployment but also a sharp decline in capital investment. Supported by the investments of the recovery act and by low interest rates, American corporations have rebuilt cash supplies, especially the banks bailed out by the Bush administration.

The output gap — essentially the difference between Kreutzer’s idealized full-tilt economy and the actual, high-unemployment, low-investment economy we have now — is huge. Incentives for companies to make capital investments are precisely what’s needed to restore economic health. And higher standards that get key industries like electric utilities to upgrade their power plants will do just that, as PERI study author James Heintz explains:

If the economy were operating at full-tilt, with low rates of unemployment and no excess capacity, there could be something to this argument.

However, the current reality is significantly different. Unemployment remains at historically high levels and one glance at the data on the financial sector, such as that provided in the flow of funds accounts, shows that lending has not recovered. Mobilizing idle resources through new investments does create jobs, since the resources were not productively employed in the first place.

Moreover, private investment is not just about spending in the economy. Investments to update and modernize the capital stock of the electricity sector generates real supply-side benefits in terms of greater productivity and improved efficiency. Such improvements lower the costs of production and support future growth.

Instead of ‘crowding out’ spending in other parts of the economy, such productivity-improving investments actually generate income. Given these considerations, there is no reason to believe the assertion that spending on capital improvements in the electricity sector will reduce spending one-for-one elsewhere in the economy.

History refutes Kreutzer as well, Heintz notes: “Indeed, since the 1990 amendments to the Clean Air Act were enacted, price trends from the U.S. Energy Information Administration show that the price of electricity, adjusted for average inflation in the economy, fell steadily as the electricity sector made sizeable investments in new capacity and pollution control technologies.”

Furthermore, if Kreutzer is going to worry about second-order effects of policies that create jobs, then we should also factor in the second-order effects of all the pollution if the standards weren’t enforced, and all the lost job-years from the lung diseases and death caused by more smog and soot in the air.

“A constructive engagement over the impact of regulations to reduce harmful emissions is welcome,” Heintz writes. “However, misrepresentation of the findings of this report, wherever they come from, only serve to undermine serious consideration of the issues.”

Mendelsohn and Saher ‘analysis’ of “The Global Impact of Climate Change on Extreme Events,” cites Roger Pielke, Jr. five times while quoting not one scientific paper focused on droughts!

This paper quantifies the global impact of climate change from several extreme events: local storms, heat waves, cold spells, floods, and droughts….  [C]limate change is calculated to increase the damages from these five extreme events by between $11 and $16 billion [sic] a year by 2100….  Summing the damages in this report with tropical cyclone and severe storm damages from the literature suggests that climate change may increase the overall damage from extreme events by $84 billion or 0.015 percent of world GDP.

Yes, two ‘leading’ economists, Robert Mendelsohn and Gokay Saher, actually wrote an entire paper for the World Bank that came to such a conclusion.  It would be laughable were the potential consequences of such misanalysis not so serious.

For the record, when actual climate scientists and agricultural experts look at these and other damages they naturally come to a very different view (see Scientists find “net present value of climate change impacts” of $1240 TRILLION on current emissions path, making mitigation to under 450 ppm a must).

Coincidentally, another just-released study, “The Last Drop: Climate Change and the Southwest Water Crisis,” that actually looks in some detail at the scientific literature for just one region, finds that drought and reduced precipitation in the U.S. SW alone could cost up to $1 trillion by century’s end.

I don’t know who is going to be disdained more by future generations devastated by humanity’s apparent inability to preserve a livable climate — the fossil-fuel-friendly World Bank or the why-bother-reading-the-scientific-literature economics community.

For the umpteenth time, Memo to economists: Please read the scientific literature before opining on the impacts of global warming.

You would think that in any rational world, an “ultimate damage” analysis by the World Bank on “The global impact of climate change on extreme events” including droughts would include multiple citations to the significant scientific literature on droughts and the impacts of reduced precipitation.  Or even cite one damn paper.

You would be wrong.  The mainstream economics community has been taken over by a form of circular benchmarking, a self-delusion where everybody cites each other and ignores the scientific literature.  I would note that the Mendelsohn and Saher cite multiple articles by proponents of traditional cost-benefit analysis for climate impacts, they don’t cite Harvard economist Martin Weitzman’s well-known work calling such an approach into question in this arena (see my post Harvard economist: Climate cost-benefit analyses are “unusually misleading,” warns colleagues “we may be deluding ourselves and others”).

I single out droughts here for one particular reason.  I was chatting recently with one of the World Bank’s leading experts on development, someone who ran one of the in-country offices of a big developing country. I was commenting to him about the devastating impact of the intense deluges that hit developing countries in the past year.  He told me he thought that the impact of extended drought was far worse than deluges because they lasted so long and went to the heart of the country’s ability to feed itself.

I believe that Dust-Bowlification — combined with the impact on food insecurity of Dust-Bowlification combined with other extreme events — is the single biggest impact that climate change is likely to have on most people for most of this century (until sea level rise gets serious in the latter decades).

Let me run through some of the scientific literature that Mendelsohn and Saher — and whoever reviewed the paper at the World Bank — didn’t deem worthy enough to include in their paper on “The global impact of climate change on extreme events” — even though they saw fit to cite their own work three times and Roger Pielke Jr.’s five times.

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GOP Proposes $1.6 Billion Cut to EPA Budget, Defends $4 Billion in Oil Subsidies

Republicans unveiled a budget plan on Wednesday that proposed a $1.6 billion cut [1] to the Environmental Protection Agency, an agency whose authority they have sought to curtail, while business trade groups [2] have complained about the burden placed on them by agency regulations. Politico also reported that the GOP’s proposal would hit the Energy Department hard [3], with a proposal to cut energy efficiency and renewable energy programs in half.

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Lee Fang, in a TP cross-post.  Head vises are a must!

ThinkProgress has learned that a law firm representing the U.S. Chamber of Commerce, the big business trade association representing ExxonMobil, AIG, and other major international corporations, is working with set of “private security” companies and lobbying firms to undermine their political opponents, including ThinkProgress, with a surreptitious sabotage campaign.

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Obama’s pollutocratic political enemies now import and refine 25% of tar sands crude and stand to profit from an increased flow

JR: A key reason the EPA slammed the State Department’s study of the Keystone XL pipeline is that the tar sands crude it would deliver is among the most carbon-intensive of replacements for conventional petroleum (see “Tar sands “” Still dirty after all these years“):

X-axis is the range of potential resource in billions of barrels. Y-axis is grams of Carbon per MegaJoule of final fuel.

David Sassoon of Solve Climate has a must-read piece on another facet of the pipeline debate, “Will Obama Reward His Bitterest Political Enemies?” reposted below:

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In the face of overwhelming public support for EPA limits on carbon dioxide pollution, opposition to weaken or delay safeguards for air pollution continues to grow.

Yesterday, nearly 2,000 health professionals and more than 2,500 scientists from all 50 states sent separate letters to Congress strongly urging full implementation and enforcement of clean air health measures.

CAP Energy Intern Matt Woelfel has the story. The health professionals asked Congress to

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