The Peak Oil Debate: An Analysis From the Federal Reserve Bank of Atlanta

The Federal Reserve Bank of Atlanta has just published a piece entitled "The Peak Oil Debate."

Written by Laurel Graefe, a senior research economist in the Atlanta Fed's research department, the article "seeks to bring the peak oil debate into focus." The article suggests that the energy outlook is clouded by factors relating to the estimates about remaining resources, the manner in which various countries report about reserves, and projections about future production.

Brazil Set to Hold First Wind Farm Auction

Word comes from Brazil that the government will hold its first wind power auction later this year.

According to the Rio de Janeiro law firm of Schmidt, Valois, Miranda, Ferreira & Agel, "This first auction has a main goal of giving the government the necessary information on the potential market in Brazil for wind power, as well as to start development of wind farm projects." The firm's analysis of the next steps in the auction process can be accessed here.

Brazil is already a world leader in terms of biofuels. Will wind be next?

Finally the Wall Street Journal Editorial Page Weighs In: Waxman-Markey Bill Does "Almost Nothing to Reduce Carbon Emissions"

It took a week, but the venerable Wall Street Journal editorial page has now weighed in on the Waxman-Markey energy bill.

Since the Journal editorial page has never seemed to think that carbon emissions are harmful, I figured the second sentence in the editorial -- which says, "The 1,200-page wonder manages the supreme feat of being both hugely expensive while doing almost nothing to reduce carbon emissions" -- indicated that they were not entirely opposed to the measure, but a further read confirms that is not the case.  

The Journal editorial page, which is as predictable as the sun coming up in the east, holds forth as follows:

President Obama is calling the climate bill that the House passed last week an "extraordinary" achievement, and so it is. The 1,200-page wonder manages the supreme feat of being both hugely expensive while doing almost nothing to reduce carbon emissions.

The Washington press corps is playing the bill's 219-212 passage as a political triumph, even though one of five Democrats voted against it. The real story is what Speaker Nancy Pelosi, House baron Henry Waxman and the President himself had to concede to secure even that eyelash margin among the House's liberal majority. Not even Tom DeLay would have imagined the extravaganza of log-rolling, vote-buying, outright corporate bribes, side deals, subsidies and policy loopholes. Every green goal, even taken on its own terms, was watered down or given up for the sake of political rents.

Begin with the supposed point of the exercise -- i.e., creating an artificial scarcity of carbon in the name of climate change. The House trimmed Mr. Obama's favored 25% reduction by 2020 to 17% in order to win over Democrats leery of imposing a huge upfront tax on their constituents; then they raised the reduction to 83% in the out-years to placate the greens. Even that 17% is not binding, since it would be largely reached with so-called offsets, through which some businesses subsidize others to make emissions reductions that probably would have happened anyway.

Even if the law works as intended, over the next decade or two real U.S. greenhouse emissions might be reduced by 2% compared to business as usual. However, consumers would still face higher prices for electric power, transportation and most goods and services as this inefficient and indirect tax flowed down the energy chain.

The sound bite is that this policy would only cost households "a postage stamp a day." But that's true only as long as the program doesn't really cut emissions. The goal here is to tell voters they'll pay nothing in order to get the cap-and-tax bureaucracy in place -- even though the whole idea is to raise prices to change American behavior. At the same time -- wink, wink -- Democrats tell the greens they can tighten the emissions vise gradually over time.

Meanwhile, Congress had to bribe every business or interest that could afford a competent lobbyist. Carbon permits are valuable, yet the House says only 28% of the allowances would be auctioned off; the rest would be given away. In March, White House budget director Peter Orszag told Congress that "If you didn't auction the permit, it would represent the largest corporate welfare program that has ever been enacted in the history of the United States."

Naturally, Democrats did exactly that. To avoid windfall profits, they then chose to control prices, asking state regulators to require utilities to use the free permits to insulate ratepayers from price increases. (This also obviates the anticarbon incentives, but never mind.) Auctions would reduce political favoritism and interference, as well as provide revenue to cut taxes to offset higher energy costs. But auctions don't buy votes.

Then there was the peace treaty signed with Agriculture Chairman Colin Peterson, which banned the EPA from studying the carbon produced by corn ethanol and transferred farm emissions to the Ag Department, which mainly exists to defend farm subsidies. Not to mention the 310-page trade amendment that was introduced at 3:09 a.m. When Congress voted on the bill later that day, the House clerk didn't even have an official copy.

The revisions were demanded by coal-dependent Rust Belt Democrats to require tariffs on goods from countries that don't also reduce their emissions. Democrats were thus admitting that the critics are right that this new energy tax would send U.S. jobs overseas. But instead of voting no, their price for voting yes is to impose another tax on imports from China and India, among others. So a Smoot-Hawley green tariff is now official Democratic policy.

Mr. Obama's lobbyists first acquiesced to this tariff change to get the bill passed. Afterwards the President said he disliked "sending any protectionist signals" amid a world recession, but he refused to say whether this protectionism was enough to veto the bill. Then in a Saturday victory lap, he talked about green jobs and a new clean energy economy, but he made no reference to cap and trade -- no doubt because he knows that energy taxes are unpopular and that the bill faces an even tougher slog in the Senate.

Mr. Obama wants something tangible to take to the U.N. climate confab in Denmark in December, but the more important issue is what this exercise says about his approach to governance. The President seems to believe that the Carter and Clinton Presidencies failed by fighting too much with Democrats in Congress. So his solution is to abdicate his agenda to Congress -- first the stimulus, now cap and trade, and soon health care. We wish he had told us he was running to be Prime Minister.

A footnote to this blog: it is probably not wise to reprint an editorial in full, but in this case it was hard to know what to delete.  The Journal's editorial board labored many hours over this piece, and it seemed rather a shame to leave anything out.  

And one more thing: the "Washington press corps" that the editorial refers to in rather disparaging fashion -- isn't the Journal part of that press corps?  Last time I check, the Journal had a very good set of reporters in Washington, led by the extremely able Gerald Seib.  Does this mean that the Journal's Washington staff is also a mere cypher for the carbon-gone-wild Democrats?

Influential European Environmental Bureau Urges European Union to Pursue Stronger Environmental Goals

 The European Union should seek adoption by developed countries of a 40 percent reduction target in greenhouse gas emissions for the 1990 to 2020 period, the European Environmental Bureau (EEB) said last week.

The EEB, which consists of more than 130 European environmental organizations from 31 countries, also recommended that EU member states shift 10 percent of their income tax-derived revenues away from labor and to energy and resource use. The recommendations were part of the EEB's "Ten Green Tests for the 2009 Swedish Presidency" of the EU.

Sweden will serve as president of the EU from the first of July through Dec. 31, 2009.  The Swedish government will play a leading role in determining the EU's negotiating position in the run up to the UN climate change meeting in Copenhagen in December.

Before each of the EU's 6-month presidencies, the EEB issues a list of 10 priorities that the presiding country should seek during its tenure as president.

Abu Dhabi Named Headquarters of International Renewable Energy Agency

The International Renewable Energy Agency (IRENA) will be headquartered in Abu Dhabi, the capital of the United Arab Emirates.

The agency was established in Bonn, Germany, in January 2009. To date, 136 states have signed the Statute of the Agency, including 45 in Africa, 36 in Europe, 32 in Asia, 14 in the Americas, and 9 in Australia/Oceania.

According to the agency:

"IRENA aspires to become the main driving force for promoting a rapid transition towards the widespread and sustainable use of renewable energy on a global scale. As the global voice for renewable energies, IRENA envisages providing practical advice and support for both industrialised and developing countries, thereby helping to improve frameworks and build capacity. Moreover, the Agency intends to facilitate access to all relevant information, including reliable data on the potentials for renewable energy, best practices, effective financial mechanisms, and state-of-the-art technological expertise."

Indian Environment Minister Criticizes U.S. "Carbon Tariff" Plan

Jairam Ramesh, India's environment minister, yesterday said his government rejected the inclusion of a "carbon tariff" in the Waxman-Markey energy bill.

A last minute provision added to the bill allows the U.S. to impose tariffs on goods entering the country from other countries that have not enacted carbon emissions reduction legislation.

Mr. Ramesh described the provision as "pernicious" adding, "We reject the use of climate as a non-tariff barrier," the Financial Times reported ("India Attacks US Carbon Tariff Plan," July 1, 2009). He also said, "We categorically reject any attempt to introduce climate change as an issue at the [World Trade Organization]."

Climate change negotiations between developed and developing countries are almost certain to be difficult in the run-up to the U.N. climate change meeting in Copenhagen in December. India's government is particularly sensitive to the desire by developed countries to limit the growth of carbon emissions, viewing it as a means of actually stalling Indian economic growth.

"India has not polluted. We are bearing the brunt of global climate change caused by the developed countries and we are being asked to curb emissions. I find this ludicrous," Mr. Ramesh said.

A footnote to the U.S. carbon tariff provision: when French President Nicholas Zarkozy suggested that the EU should adopt a similar measure for goods coming into the EU from countries not addressing climate change, the bellyaching in Washington could be heard all the way to the Elysee Palace in Paris. Apparently, what's good for the goose (in this case the U.S.) is not always good for the gander.

Reports From "Troubled Waters:" The Niger Delta

The Niger Delta has untold riches in the form of oil and gas.  But the "community relations" and social problems associated with extracting the oil are enormous.  The Financial Times recently published a story, and accompanying videos, entitled "Interactive Map: Nigeria's Oil Heartland," that is a must read for anyone interested in the vexing issues involving this often forgotten, but immensely important, part of the world.

Financial Times' Characterization of Waxman-Markey: "Cap-and-Trade Mess"

Sometimes it is useful to look outside of one's "neighborhood" to see how an issue is playing somewhere else. This helps provide context for what may otherwise be only an "inside analysis" of a particular problem or issue.

An editorial in Monday's Financial Times, which is published in London, provides a welcome "outside" look at the recently passed Waxman-Markey energy bill. Despite the hoots and hollers by the bill's U.S. supporters, the view from the other side of the Atlantic -- and the only place, incidentally, that has a major emissions trading scheme -- raises some thought provoking observations:

"Cap-and-Trade Mess"

"The US House of Representatives has passed a bill to limit greenhouse gases. The White House lobbied hard for it: “A bold and necessary step,” said Barack Obama. Many hailed its passage as a triumph. In fact there is little to celebrate.

"Recall that cap-and-trade was expected only recently to pass in the House without difficulty. It scraped through by 219 votes to 212, with 44 Democrats voting against. Opposition to cap-and-trade in the Senate is stronger, so the chances of this bill or anything like it becoming law look slim.

"To make matters worse, the bill makes political compromises that undermine its effectiveness. Even so it passed by just seven votes. What this says about the prospects of a more forceful measure – one that dares to confront consumers with significantly higher energy costs – is discouraging.

"To curb climate change, the world needs to cut carbon emissions. It needs US leadership on the issue too. But this bill is not the way. A bewildering combination of cap-and-trade, mandates, new regulation, and every kind of open and disguised subsidy, it is too complicated, too prone to subversion and in many ways downright self-defeating.

"To soften its impact, the House first adopted undemanding targets for emissions. Debate made them milder still. Instead of auctioning emissions permits, the bill would give nearly all of them away, so the measure does little to raise needed revenue. Permits will be handed to electricity producers on condition that the windfall be passed to consumers, many of whom would see their electricity bills fall as a result.

"Learning nothing from Europe’s experience, the bill relies heavily on offsets, which let companies pay someone else to plant trees or cut emissions, so they do not have to. The still-unsolved problem is policing the system to ensure the offsets are real. The bill gives oversight of domestic offsets in farming to the Department of Agriculture – good news for farmers seeking a new trough of subsidy. To defend US competitiveness, it proposes subsidies for exporters and penalties on importers. In principle, cap-and-trade does require border adjustments, but the bill is careless and creates a gateway for protectionism.

"In short, it is a mess. The key to a better plan is understanding that you cannot cut carbon without making carbon-based fuels more expensive – an obvious point, you would think. But it is one that US policymakers still cannot face."

Doesn't exactly seem like a vote of confidence, does it.

New Course to be Offered in August: "Community Expectations in Natural Resource Development Projects"

Mining and oil and gas companies operating across the world understand that a key component of their success is tied to successfully managing “community expectations” in locations where they operate. Even where companies scrupulously comply with national law, they may find themselves in considerable difficulty where they have not achieved a “social license to operate” in the communities in which they work.

David Humphreys, chief economist for mining sector giant Rio Tinto, has observed, “[Mining] is a capital intensive industry and, generally, not a very profitable one, which can ill afford the delays, disruptions and other costs that are associated with poor community relations. At the same time, the benefits of managing community relations well prospectively confers competitive advantages on a company.”

As a consequence of the growing importance of managing community relations, the Sturm College of Law will offer “Community Expectations in Natural Resource Development Projects,” August 10-14, 2009. The course will be taught by Luke Danielson, former Director of the Mining Minerals and Sustainable Development Project at the International Institute for Environment and Development in London, and the Mining Policy Research Initiative of the International Development Research Centre.

The objectives of the course, which will meet from 8 a.m. to 5 p.m. during the week, are:

• Understanding the strategic importance of successful community relations.
• Creating a multi-disciplinary examination of community relations, including consideration of social, legal, and economic issues.
• Analyzing the “tool box” of ideas and concepts available to successfully manage community relations.
• Exploring how to avoid problems and what to do when community relations problems arise.
• Understanding the role of law and lawyers in dealing with these issues.
• Introducing students to a simulated community relations exercise.

The course is open to all DU JD, LLM, and MRLS students. It is also open to other professional and graduate students from other universities as well as the public more generally. Course tuition will be about $3,500.

Don C. Smith, Director of the Environmental and Natural Resources Law & Policy Graduate Program (ENRGP) at DU, said, “The growing importance of how companies successfully manage community relations cannot be understated. Many stakeholders – including communities, governments, financial institutions, NGOs, and shareholders – are more closely than ever before monitoring companies’ actions in this area. Consequently, the downside of poorly handling community relations can be disastrous. Mr. Danielson, who is recognized internationally as an expert in this field, will provide students a first-hand overview of this key, but often neglected component of natural resources development efforts.”

This three-credit one-week “short course” represents the ENRLP’s second of several offerings aimed at “non-traditional” LLM and MRLS students. This course in combination with another short course to be held Aug. 3-7, 2009, and several on-line offerings means that LLM and MRLS students can earn substantial credit in DU’s prestigious Environmental and Natural Resources Law & Policy Graduate Program without committing to a year of study in Denver. “This is a new step in our efforts to reach out to a world-wide community who can benefit from our program,” Lucy Daberkow, Assistant Director, said.

Individuals who would like to earn LLM or MRLS credit for the course should first seek admission to the ENRGP program by mid-July. Admissions information can be found by clicking here or by contacting Mr. Smith at dcsmith@law.du.edu or Ms. Daberkow at ldaberkow@law.du.edu. In addition, those who have general questions about the course should contact Mr. Smith or Ms. Daberkow.

Adios a Nuestro Amigo Diego Parravicini/Goodbye to Our Friend

One of the great attributes -- and joys -- of the environmental and natural resources graduate program is the opportunity it provides to expand our own horizons, both in personal and community terms. Last night is a good example of how we all benefit personally and in a communal sense.

Diego Parravicini (LLM graduate 2008) will soon be returning to his home country, Argentina, to join one of South America's leading law firms, Estudio Beccar Varela. Diego has been a wonderful member of our community since first coming to Denver in August 2007, and I wanted to wish him well on his return home. So what better reason for a mid-summer (in the northern hemisphere at least!) cook out.

Joining me in saying goodbye -- at least for now -- were other members of "our community:" Fred Cheever, DU Professor of Law and newly appointed Associate Dean for Academic Affairs; Pedro Camacho (LLM 2009, who hails from Spain) and his wife Olga; Cesar Conde (LLM 2008, Mexico); Lucy Daberkow, Assistant Program Director, her husband Eric, and los angeles Amelie and Emma); Kevin Van Dyke (LLM 2008, U.S.) and his wife Meaghan; Denver attorney and nationally known environmental lawyer Lori Potter (whose law firm Kaplan Kirsch & Rockwell LLP employed Diego for the year following Diego's graduation) and her husband Eric; and Ines Vergara (LLM 2002, Argentina).

These occasions are bittersweet in many ways. On one hand, those of us who live in Denver are sad to see a friend and colleague leave. But on the other hand, the community that the graduate program represents is a vibrant and energetic one and just because one is not physically here does not mean that they are not here in spirit. Moreover, as all of us in the program work to establish an even more dynamic community, we are reminded about how our lives will likely intersect again in the future based on our shared interests in the environment, in the careful development of natural resources, and in the health of the planet more broadly.

Those who study in the program will never really be "gone" in the sense our community is a global one. Obviously, for some months or years we may reside in one place -- Denver in this case -- and then move to another place. But the ties that bind us as members of this community are strong and enduring.

And so we say to our friend Diego, "Buen suerte en Buenos Aires y hasta muy pronto!" (Good luck in Argentina and see you very soon!)

China Establishes "Experimental Environmental Courts"

China, a country with enormous environmental challenges largely related to the rapid development of its economic basic, has established several experimental environmental courts.

According to a report in a recent issue of the BNA Daily Environment Report ("Experimental Environmental Courts in China Start to Take Shape as New Legal Authorities," June 26, 2009), the country has set up test courts in the provinces of Guizhou, Jiangsu, and Yunnan.

An attorney in the Natural Resources Defense Council Beijing office, Gao Jie, told the Daily Environment Report:

"Looking back at the original intention for establishing environmental courts in places like Guizhou, we can see that the institutions began with a highly experimental nature.  Good results could then lead to wide implementation, and any problems and challenges revealed by the first set of environmental protection courts could influence directional changes and policy modifications."  

The entire article is worth reading for those interested in how these courts are working.

One thing is for sure: there will be no lack of work for these courts.  

The European Chemicals Agency has published a new series of shortened versions of the REACH Guidance Documents and Fact Sheet.

The first two publications are "Requirement for Substances in Articles" and "Dossier Handling."

The ECA, which is located in Helsinki, Finland, manages the registration, evaluation, authorization, and restriction processes for chemical substances to ensure consistency across the European Union.