A friend recently pointed me towards an interesting (if brief) piece recently done for MSNBC (warning: video link) entitled “Green Hospitals Extend Mission to ‘Do No Harm’”. The piece touches upon the efforts taken by one local hospital to “green up” its facilities, via incorporating more recycled materials into the environment and attempting to take a holistic approach to minimizing an environmental footprint.

Given as hospitals are such a giant source of various problematic waste-products–and given how regulated the hospital waste-regime seems to be at present–it’s interesting to observe what appears to be a voluntary embarkation onto an ancillary (but, one hopes, effective and trend-setting) process for continuing to minimize the effect of such facilities on environmental.

…and heck, speaking as someone who finds hospitals to be only mildly less offensive and alienating than airports, a trend towards a more sensible, environmentally friendly design aesthetic seems to bode well for the essential humanity of the facilities in question.

A big concern with national climate change policy proposals regards the issue of international competitiveness. A national climate change policy like a cap-and-trade system or a carbon tax will impose higher costs on the producers of regulated products, and if foreign producers of competitive goods are not similarly regulated, they will possess a competitive advantage over our domestic producers. Without proper measures, consumers in the U.S. will probably prefer to buy the cheaper (less regulated) imported products over the more expensive (but climate change-regulated) domestic goods. This could not only damage domestic industry (even if producing goods just as efficiently as their foreign competition), but could also lead to more production of unregulated, dirty, carbon-intensive goods (what’s referred to as leakage). A double whammy.

One potentially elegant solution to this problem presents itself in the form of “border adjustments“. With border adjustments, a tariff would be imposed on any product imported into this country from a country that did not impose adequate climate change regulations on its production. A recommendation along those lines has been recommended by two large U.S. Unions (the IBEW and the AFL-CIO), and by the U.S.’s largest coal-burning utility, AEP (strange bedfellows indeed). Their proposal would require “large emitter” countries (read: China & India) to submit allowances to the US for any unregulated emissions created during the productions process of products they intend to export to the US.

A second, much less talked about side to border adjustments regards the exporting of US products regulated under climate change legislation. Using the same competitiveness arguments as with incoming border adjustments, if we want our ostensibly “cleaner” US products to be able to compete with foreign products on their turf, we could offer “rebates” to exporters to strip these products of their regulatory costs when exported to these countries. Without such rebates, we’ll be placing domestically produced exports at a competitive disadvantage with their foreign produced, cheaper, and “dirtier” competition; a situation ripe for leakage.

There are a lot of important issues at stake when thinking about competitiveness and climate change policies. When thinking about these and other issues, it’s been helpful for me to realize that by placing a price on greenhouse gas emissions, a cap-and-trade system or carbon tax will be forcing producers of carbon-intensive goods to cover the true (or at least truer) costs of their products (they will be internalizing an externality). If we agree that unregulated producers in other countries (and currently in this country) are not being forced to pay for these costs, then we can also say they are actually being subsidized by their governments. By imposing border adjustments on such subsidized products, we would just be leveling the playing field.

For more information:

• “Competitiveness Under Climate Policy,” a blog post by Daniel Hall at the environmental economics blog Common Tragedies.
• A paper by Richard Morgenstern at Resources for the Future regarding Competitiveness & Mandatory US Climate Policies.
• “Should a Carbon Tax be Border Adjustable?”, a blog post over at Greg Mankiw’s Blog.

In a Rose Garden speech last week, President Bush said that the public deserves “an honest assessment of the costs, benefits and feasibility of any proposed solution” to climate change. Today his administration took a small step towards that goal, monetizing the benefits of reduced greenhouse gas emissions for the first time in its proposed fuel economy standards.

The change was prompted by the Ninth Circuit, which threw out the president’s last fuel economy standards in part due to their failure to quantify those benefits. Rejecting the Department of Transportation claim that the broad range of values made monetization too difficult, the court held, “While the record shows that there is a range of values, the value of carbon emissions reduction is certainly not zero.”

Bush’s latest fuel economy proposal will begin requiring industry to internalize the costs of their contributions to global warming. This sort of monetization should be incorporated in all future rules and permitting decisions, to the extent that statutes permit; it’s one of the most effective ways we can begin to address climate change until a new regulatory scheme is in place.

Unfortunately, the president thinks a ton of carbon dioxide is worth about as much as a sandwich at Cosi (without chips.) Valued at $7/ton, the pollution would be a steal at twice the price. In Europe, carbon dioxide is trading at around $40/ton — but everything’s more expensive there.

NHTSA claims that it settled on the $7 value by averaging the lower bounds ($0/ton) and upper bounds ($14/ton) of the IPCC’s latest estimates of global warming’s costs. The IPCC never actually said that climate change would have zero economic costs, however; the administration manufactured that figure by limiting its focus to purely domestic impacts. Nor does the IPCC ever suggest that domestic costs will be zero, but, in a creative interpretation of the report’s silence, the administration concludes, “[The IPCC] does not necessarily rule out low or zero values for the benefit to the U.S. itself from reducing emissions.”

The upper bound, meanwhile, is right around what environmental groups had previously recommended as a minimum value. And it’s less than a third what the EPA recently estimated a ton of carbon dioxide would cost under the the Lieberman-Warner bill. Granted, EPA was measuring the costs of reducing global warming pollution while NHTSA was measuring the benefits of those reductions. I’ve never taken an econ class in my life, but I guess I’d assumed that in a functional market there would be some relation between the two.

There’s lots more to discuss in the CAFE proposal (including NHTSA’s refusal to accept the determination of Congress and two district courts that fuel economy standards don’t preempt state controls on vehicle greenhouse gas emissions), but that can wait for another post.

Happy Earth Day everyone.

We know Earth’s temperature is on the rise, but how far is it going to go?

The short answer is, we don’t know. The long answer is, it depends on feedback loops. For example, how much will warming accelerate when we have less polar ice to reflect the sun?

An even longer answer—the one you might get from John Anda, President of Environmental Markets Network and former Vice Chairman at Morgan Stanley—is that it’s a question of probability distribution. In other words, we don’t know how much the Earth’s temperature is going to rise, but we have some idea of how likely the temperature is to rise by 2 degrees centrigrade, 3 degrees, 4 degrees, 5 degrees, etc.

The interesting thing about climate change is that those probabilities aren’t distributed in a normal bell curve—the kind that gave very few students As and very few students Fs, and a whole lot of students Bs and Cs, in your college 0-chem class. Instead, climate change has what’s called a fat-tail risk, a small but significant probability that the temperature will rise by 5-10 degrees Celsius, a change that would have catastrophic results for our climate.

If climate change were a grading curve for a class, it would look something like this: no As for anyone (because the temperature is already rising), quite a few Bs available for very hard-working, focused students (because we can probability limit temperature change to 2 degrees celsius, which we can probably adapt to, if we act quickly and aggressively), even more Cs for the less-focused students (a 3 degree rise in temperature), and somewhere between 10 and 30 percent Ds (4 degree rise in temperature), and about 10 percent Fs (more than 4 degree rise in temperature, which would be catastrophic). Only, instead of flunking O-Chem, the students who get Fs drop out of college, move back in with their parents, eventually end up in prison, and die alone.

With a probability distribution like that, it’s very important to avoid the small, but not insignificant, possibility of an F, because you just can’t afford one.

“The distribution of outcomes for climate is not normal, so we have to hedge that risk,” explained Mr. Anda at Carbon Trading Update, a talk on carbon markets and risk management, last week. “We don’t have the tools to hedge the risk of having something really bad happen to our climate – that’s in uninvented technologies. We really do need quantity limits on carbon.”

Mr. Anda, like his co-panelists, favors a cap and trade system that would limit greenhouse gas emissions enough to avoid catastrophic climate change, and use trading to reduce emissions in as cheaply and efficiently as possible.

It being tax day, it seemed as good a time as any to complain about the quickly fading hybrid tax credit. Apologies to everyone who’s endured this rant in person, you can stop reading now.

This summer, the tax credit for the second most efficient hybrid on the road will be cut in half. In less than a year, it will be gone. The most and third most efficient both lost their credits last October. Actually, if you’re looking for help from the federal government, you’re better off buying 16 mile-per-gallon Chevy Silverado hybrid than a 46 mpg Prius.

That’s because when Congress passed the hybrid tax credit, one of the few bright spots in the 2005 energy bill, it also capped the federal assistance at 60,000 vehicles per manufacturer. Behind the success of the Prius and the Camry hybrid, Toyota was the first to hit its ceiling. Honda followed about a year later, so its credits are currently being phased out. None of the Detroit Three are in danger of reaching their cap anytime soon; in fact, lobbying from domestic automakers is a main reason we’re currently saddled with this illogical limit.

One could argue that high gas prices are incentive enough for hybrid vehicles. Maybe, though fuel prices fluctuate, and if we’re subsidizing some hybrids they might as well be the good ones. Lifting the cap also shouldn’t be too heavy a political lift, since President Bush has publicly supported doing so. The House voted to extend the credit in its last energy bill, but when the Senate couldn’t agree on a tax package it was dropped in order to get the legislation through conference. And with the entire tax credit set to expire at the end of 2010, extending it for the next two years won’t break the bank.

The hybrid credit isn’t a long-term solution to our nation’s energy needs. But it’s a nice complement to the fuel efficiency boost that Congress just passed, and a sign of legislative support for greener vehicles. If it lapses in two years, we’ll have to find some way to fill in the gap (revenue-neutral fee-bates should at least be on the table.) But until then, let’s honor the credit in full, instead of denying it to the hybrids that deserve it the most.

Happy filing everyone.

Another tax-related note
If Congress needs to raise some money to pay for this credit extention, it might want to amend the gas guzzler tax to cover, well, gas guzzlers.  In 1978, Congress imposed a tax on passenger vehicles that averaged less than 22 miles per gallon, in order to “discourage the production and purchase of fuel-inefficient vehicles.”  The only problem?  “Trucks, minivans, and SUVs are not covered because these vehicle types were not widely available in 1978 and were rarely used for non-commercial purposes.”  Today, trucks, minivans and SUVs account for half of all vehicle sales, are often used for non-commercial purposes, yet they’re still exempt from the tax due to this decades-old loophole.

Hello, everyone. This is my inaugural post at Breaking the Logjam; please be gentle!

E-Waste is, unsurprisingly, a fascinating issue, and one that is likely to see a flurry of activity at all levels of government. On the local front, Mr. Adler recently spoke to his views regarding the federal government’s role in setting hazardous waste policy at the recent Breaking the Logjam conference (see his summary at the Volokh Conspiracy here.)

Consequently, I was intrigued to learn recently that Oregon is taking the initiative with regard to implementing an E-Waste policy. As described by the New Oregonian, House Bill 2626 would:

[allow] people to take their old desktop and portable computers, monitors and televisions to collection centers throughout the state for free recycling by licensed operators or manufacturers. By the following year, those electronics will be banned from all landfills in Oregon.

(a PDF of the bill in question is available here)

Given the obvious international nature of the E-Waste situation, I am very interested to see what kind of effect the Oregon statute might have.

Most BTL readers will remember the Center for Biological Diversity’s (CBD) landmark November 2007 victory, in which the 9th Circuit Court of Appeals held (among other things) that the National Highway Traffic Safety Administration’s (NHTSA) decision not to monetize the benefits of carbon emissions reduction in determining the April 2006 Corporate Average Fuel Economy (CAFE) standards for light trucks was arbitrary and capricious.

Even if NHTSA may use a cost-benefit analysis to determine the “maximum feasible” fuel economy standard, it cannot put a thumb on the scale by undervaluing the benefits and overvaluing the costs of more stringent standards. NHTSA fails to include in its analysis the benefit of carbon emissions reduction in either quantitative or qualitative form… there is no evidence to support NHTSA’s conclusion that the appropriate course was not to monetize or quantify the value of carbon emissions reduction at all. - Judge Betty B. Fletcher, CBD v. NHTSA, 508 F. 3d 508, 531-534 (9th Cir. 2007).

The CBD v. NHTSA litigation was likely supported by documentation CBD obtained through a Freedom of Information Act Request (FOIA) it submitted to NHTSA, the Department of Transportation (DOT), and the Office of Management and Budget (OMB) on August 29, 2006. CBD’s FOIA request asked for all documents relating to the development of the final rule at issue, including (but not limited to) inter-agency reviews, draft documents, agency meeting notes, inter-staff correspondence, and internal reviews and critiques. Specifically, CBD requested information regarding the “assumptions, data or research behind the valuation of greenhouse gases in the agency’s cost-benefit analysis for the [2006 light truck CAFE] rule.” CBD v. OMB, 2008 U.S. Dist. LEXIS 19739, *20 (N.D. Ca. 2008).CBD also requested a FOIA fee waiver. This request was ultimately granted by DOT and NHTSA. In contrast, OMB formally denied the waiver request on January 26th, 2007 and again on July 19th 2007. CBD responded with an additional letter explaining why its request qualified for a fee waiver, but did not receive a response from OMB within the FOIA mandated 20-day response period. As you probably guessed from the citation above, CBD filed suit in the Northern District of California on September 27, 2007, requesting a finding that OMB had violated the requirements of FOIA and an order requiring OMB to provide CBD with all requested documents at no cost, and within twenty days. CBD Complaint; see also OMB response.

In a notable March 12, 2007 decision, Judge Marilyn Hall Patel granted CBD’s fee waiver request. Judge Patel grounded her reasoning in a discussion of the first prong of the two-part test that determines whether an agency is required to grant a FOIA fee waiver request: whether the disclosure was likely to contribute significantly to public understanding of the operations or activities of the government.To defend its position that the documents provided under the fee waiver would not contribute to the public’s understanding of government operations, OMB argued that most of the information requested by CBD was likely to be shielded by the deliberative process privilege. The deliberative process privilege derives from the FOIA exception for “inter-agency or intra-agency memorandums or letter which would not be available by law to a party (other than an agency) in litigation with the agency.” 5 U.S.C. § 552(b)(5). In its sweeping invocation of this privilege, OMB claimed that “its unique role as a deliberative agency that advises the President about proposed regulations makes this the rare case in which it is proper to decline a fee waiver in light of the likely privileged nature of the material found upon a search.” CBD v. OMB at *13. Judge Patel found that letting this broad invocation stand would “allow OMB to put the cart before the horse,” noting that OMB should first “identify the requested documents and then determine which documents may be withheld because of the exemption.” Id.

Bringing us back to CBD v. NHTSA, Judge Patel held that:

cost-benefit analysis is particularly meaningful in the NHTSA rules and its results could make a particular option more or less attractive to the NHTSA. Depending on the weight placed on the cost of greenhouse gas emissions, there is a substantial likelihood that the requested documents will shed light on this administration’s policy on how climate change is impacting fuel economy standards… Mere knowledge of the weight will significantly increase the public’s understanding. Id. at *20-21.

In their recently released book, Retaking Rationality, NYU Law Dean Richard Revesz and Michael Livermore, Law Clerk to the Hon. Harry T. Edwards, argue that progressive groups must actively participate in governmental proceedings concerning the cost-benefit analysis of federal regulations. Meaningful participation requires progressive groups to understand how the government is deliberating proceeding. Hopefully, Judge Patel’s decision in CBD v. OMB will aide CBD in its efforts to understand the role that OMB played in NHTSA’s decision to exclude consideration of carbon reduction benefits in setting the 2006 light truck fuel economy standards.

Additional CBD v. NHTSA information:

-Climate Intel has NHTSA’s petition for a rehearing en banc.
-Warming Law has the enviro & state responses.
-NHTSA recently issued a Notice of Intent to Prepare an EIS for model years 2011 to 2015 CAFE standards.

I’ll get my biases out of the way up front: I’m not in the John Tierney fan club. I don’t think the Kyoto’s Protocol’s an “expensive hairshirt,” I don’t think the Heartland Institute’s a reliable source information on climate science, and I think the talking muffin joke he disparages in his column on humor is always funny. That said, I also think his summary of the Breaking the Logjam conference is misleading and intellectually dishonest.

Tierney claims that federal environmental deregulation creates a state-by-state “‘race to the top,’ as illustrated in the greenhouse-emission policies being pursued by individual states while Washington has stalled and sometimes gotten in the way.” While many have advocated a larger state role in environmental decision-making, I’m not sure that climate change provides the best support for this trend. While it’s true that states and even municipalities have taken the lead on global warming, that’s out of necessity, not because they think that governors and mayors are best positioned to address global climate problems. In fact, many of the states and some of the cities that pioneered domestic climate initiatives are the same ones that sued EPA to regulate carbon dioxide under the Clean Air Act. They’re not afraid of a strong, federal regulatory presence; they’re crying out for one.

And, no, the Clean Air Act is not the most efficient way of addressing climate change. That’s why Congress is working to amend it, with climate legislation that targets upstream emitters and not the hundreds of thousands of buildings and farms that Tierney mentions. Those factories and farms could still be impacted by higher energy prices in a carbon-constrained economy, and most climate legislation would create some new levels of federal bureaucracy. But that’s needed to solve a problem the scale of global warming, and it seems to offer a better prospect of success than giving “states more freedom in how to meet their” greenhouse gas targets. I’m not sure if Tierney (citing William Pederson here) is proposing state-based greenhouse gas targets, though I can’t imagine how they’d work.

Meanwhile, the federal environmental bureaucracy Tierney maligns as a “big stumbling block” is partly responsible for a 25 percent drop in six principal air pollutants over the last several decades. Many of the environmental problems we’ll face in the future are different than those we’re currently fighting, and the Breaking the Logjam project aims to shape environmental policies across all levels of government to address these changes. But it’s too simplistic to suggest that Washington will be able “tackle climate change” by “promoting local innovation rather than discouraging it with rigid decrees.”

And the muffin joke was funny.

Yesterday, the New York state legislature refused to give New York City the authority to institute a congestion pricing program, a measure that has significantly improved traffic speed and reduced air pollution in London. As a result, the city will lose $354 million in federal funds that would have improved everybody’s commute.

Albany justified its decision on the grounds that the proposal would mostly benefit wealthy people in Manhattan at the expense of lower-income and middle class drivers, but that’s simply not true.  Car owners are overwhelmingly wealthier than non-car owners: racial minorities and poor people are overwhelmingly less likely to own cars than white people and wealthy people, and New Yorkers who own cars are also more likely to be homeowners. Furthermore, the congestion price would not have applied to drivers who qualified for the earned income tax credit.

It’s pretty clear that Albany has made a poor policy choice: the rejected a proven, market-based program that would have improved everyone’s commute by improving transit and clearing up congestion, reduced air pollution, and attracted hundreds of millions of dollars in federal funding–and Albany’s justification for its decision simply doesn’t survive the facts.

This obviously wouldn’t have happened if New York City had had the authority to pass congestion pricing on its own–the city council voted 30-20 in favor of congestion pricing last week. Would cities–and the planet–be better off with more local authority and less state oversight?

If one were to look for specific examples of “logjams” in U.S. environmental policy, a prime candidate would be the agricultural lobby. This past Sunday the Wall Street Journal, in an article entitled “Farm Lobby Beats Back Assault on Subsidies,” detailed the most recent victory of the agricultural lobby against a proposed (and modest) reining in of the vast system of direct payments and price supports that undergird the multi-billion dollar agricultural subsidy system within the U.S. (make sure and check out their fantastic interactive breakdown of the U.S. agricultural subsidy system).

Thanks in large part to their successful lobbying, agriculture has been practically exempt from environmental regulation, either through explicit exemptions for agricultural activities, or through laws structured in such a way as to allow for farms to escape most or all environmental regulatory impact in what professor J.B. Ruhl (and Breaking the Logjam participant) has deemed the “anti-law of farms.” Professor Ruhl has researched and analyzed agriculture and environmental law in extreme detail, and notes there are “few exceptions to this anti-law.”

It is not a stretch to say that a great many of the harms agriculture is responsible for have been created by or exacerbated by our regulatory coddling of agribusiness. Take just three examples: 1) as noted by fellow BTL blogger Daniel Wieck, agricultural runoff is responsible for the majority of non-point source water pollution in the U.S., yet many “normal farming practices” are specifically exempted from the Clean Water Act; 2) Agricultural price support programs for sugar have artificially raised the price of sugar in the U.S. and have led to the destruction of a large part of the Florida Everglades; and 3) Agricultural activities are also responsible for 7% of domestic greenhouse gas emissions, yet the U.S. is not even considering direct regulation of these emissions.

To top it all off, when Congress actually has legislated curbs on environmental harms from agriculture, they have done so through billions of dollars worth of more subsidy payments - to the very same farms creating the pollution in the first place! (There are two primary types of federal programs that provide subsidies to the agricultural industry ostensibly for environmental protection: land retirement, easement and conservation programs such as the Conservation Reserve Program (CRP), and working lands programs such as the Environmental Qualities Incentives Program (EQIP) (the NYT had a great recent article on EQIP)).

This is a serious logjam in environmental regulation, and many people on both the left and the right agree something needs to be done to lessen agribusiness’s hold on legislation. New Zealand managed to do so in 1984, despite having an economy much more reliant on agricultural production. It’s time we follow suit.

Further Reading:

• Agribusiness: Long Term Contribution Trend (agribusiness lobbying data from the Center for Responsive Politics)
• “Surviving Without Subsidies” (Aug, 2007 NYT article by Wayne Arnold)
• “In the Farm Bill, A Creature from the Black Lagoon?” (January 2008 NYT article by Andrew Martin)
• “EQIP in the News” (post by Anthony Schulz in Agricultural Law Blog)