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A Nobel Prize for Showing That Freedom Works

info@reason.org (John Stossel) — Thu, 22 Oct 2009 12:42:00 EDT

Pundits and politicians act as if government can solve almost any problem. At the slightest hint of trouble, the ruling class reflexively assumes that knowledgeable, wise and public-spirited government regulators are capable of riding to the rescue. This certainly is the guiding philosophy of the Obama administration.

So how remarkable it is that this year's Nobel Memorial Prize in economics was shared by Elinor Ostrom, whose life's work demonstrates that politicians and bureaucrats are not nearly as good at solving problems as regular people. Ostrom, the first woman to win the prize (which she shared with Oliver Williamson of UC-Berkeley), is a political scientist at Indiana University. The selection committee said that she has "challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized. Based on numerous studies of user-managed fish stocks, pastures, woods, lakes and groundwater basins, Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories. She observes that resource-users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts" (emphasis added).

Ostrom's work concentrates on common-pool resources (CPR) like pastures and fisheries. Policymakers assume that such situations are plagued by free-rider problems, where all individuals have a strong incentive to use the resource to the fullest and no incentive to invest in order to enhance it. Analysts across the political spectrum theorize that only bureaucrats or owners of privatized units can efficiently manage such resources.

Few scholars actually venture into the field to see what people actually do when faced with free-rider problems. Ostrom did. It turns out that free people are not as helpless as the theorists believed.

She writes in her 1990 book, Governing the Commons: The Evolution of Institutions for Collective Action, that there is no shortage of real-world examples of "a self-governed common-property arrangement in which the rules have been devised and modified by the participants themselves and also are monitored and enforced by them."

In other words, free people work things out on their own.

Not only is government help often not needed, Ostrom says it usually screws things up because bureaucrats operate in an ivory tower ignorant of the local customs and the specific resource.

Political theorists assume away the problems of political control, but the problems are real. There is no reason to believe that bureaucrats and politicians, no matter how well meaning, are better at solving problems than the people on the spot, who have the strongest incentive to get the solution right. Unlike bureaucrats, they bear the costs of their mistakes. Moreover, as the prize committee pointed out, "Rules that are imposed from the outside or unilaterally dictated by powerful insiders have less legitimacy and are more likely to be violated."

Some of Ostrom's readers think that she is as critical of the free market as she is of government management. She writes, "(N)either the state nor the market is uniformly successful in enabling individuals to sustain long-term, productive use of natural resource systems." But what those readers miss is that the resource-management arrangements Ostrom documents are voluntary agreements that people themselves devise, monitor, and enforce. These agreements are part of the free market, even if the resource is not formally divided into privately owned units. Fundamental for advocates of freedom is not "the market" narrowly conceived, but the broader realm of consent and contract.

I was amused to see the lengths to which The New York Times went to spin Ostrom's (and Williamson's) selection in an anti-free-market direction. Reporter Louis Uchitelle wrote, "Neither Ms. Ostrom nor Mr. Williamson has argued against regulation. Quite the contrary, their work found that people in business adopt for themselves numerous forms of regulation and rules of behavior—called 'governance' in economic jargon—doing so independently of government. ..."

Please. Rules of behavior that are independent of government are not what anybody means by "regulation." Advocates of regulation say people can't devise methods of "governance" that leave politicians out of the picture, but Ostrom shows they are wrong.

We libertarians aren't against rules—we are against top-down rules imposed by out-of-touch bureaucrats. People generate better rules when the state leaves us alone.

John Stossel will soon host Stossel on the Fox Business Network. He's the author of Give Me a Break and of Myth, Lies, and Downright Stupidity. This column first appeared at Reason.com.

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Dishonest Attacks on the U.S. Chamber of Commerce

anthony.randazzo@reason.org (Anthony Randazzo) — Mon, 19 Oct 2009 13:05:00 EDT

MoveOn.org is joining the attack on the U.S. Chamber of Commerce (USCC) today, sending out an email asking its members to lobby against businesses who believe the health care and energy bills being discussed in Congress will damage their ability to do business. MoveOn writes:

Anheuser-Busch is helping fund a $100 million campaign by the U.S. Chamber of Commerce to kill clean energy and health care in Congress. Other companies, such as Apple, have quit the Chamber in protest, but Anheuser-Busch is still a dues-paying member. Can you call Anheuser-Busch and urge them to quit the Chamber of Commerce?

How terrible of Anheuser-Busch to want to avoid increased operations costs that would likely require them to fire employees. Do health care and energy bill advocates seriously not understand that the legislation as written today will increase unemployment?

As for MoveOn's note of Apple. This is especially dishonest. Al Gore sits on the board of Apple. Yep, Mr. Inconvenient Truth himself, who is a proponent of the energy bill and is also personally invested in the alternative energy products that the Cap & Trade bill would force firms to use. Do energy advocates seriously not see the rent seeking behavior going on here? This is the kind of crony capitalism that progressives should be livid about.

And that's not the only reason Apple backed away from the USCC on this issue. Where are most of Apple's products created? In East Asia. So who would get hurt most by the operations costs increases of the energy and health care bills? Apple's competitors. No one can fault Apple for supporting legislation that would hurt its opponents more than its costs would go up. In fact it is good business. But passing the bills would be bad politics.

The Adventures of a Guilty Liberal

dan.hayes@reason.org (Dan Hayes) — Tue, 06 Oct 2009 10:21:00 EDT

Colin Beavan and his two-year-old daughter Isabella are in the bathroom cleaning out mommy's cosmetics when they decide to wash their laundry by stomping their feet on a tub full of clothes and all-natural Borax detergent. It's one of the many inconvenient and impractical things Beavan and his family do in the new documentary No Impact Man. Beavan explains that he normally thinks in terms of "collective action" because "as a liberal" he's weak on "individual action." The film chronicles his attempt to "develop and live a no impact lifestyle" for one year in the middle of New York City.

The Beavans give up toilet paper, any products with packaging, cars and public transit, elevators, plastic bags, and shopping for anything new. In addition, they won't use washing machines, disposable diapers, or food grown outside a 250-mile radius of NYC. It's an ambitious plan and the Beavans engage it in more dramatic phases over time. At the six-month mark, Beavan turns off the electricity in his apartment, relying instead on the small amount of juice produced by a solar panel on his roof (which allows him to blog and video chat). The film follows the family as they take a variety of steps to move in the direction of minimizing their impact on the environment. Colin's wife, Michelle, is a shopping and reality TV addict and a self-described "high fructose corn syrup-addicted, screen-addicted, meat-eating girl" who writes for Business Week. She's not eager to start what she describes as "his project" and Beavan describes as "our project."

Directed by Laura Gabbert and Justin Schein, No Impact Man is a well-made film with good pacing, photography, and sound design. While the film accomplishes the broad goal of making the audience think twice about daily consumption habits, it falls short in at least one important way. The film starts with Beavan asking, "At the end, we will come out of it and see what were we willing to give up. What was too hard? What wasn't too hard?" Unfortunately, Beavan doesn't adequately address the questions he set out to answer. Nor does he acknowledge the many benefits of living in a capitalist, consumer-driven economy.

One expects to find a movie full of challenging moments and reflection about all the conveniences we take for granted in our modern world. But instead, the filmmakers focus on how people perceive the project and whether or not the Beavans should have a second child. The challenges they face, though, are minor and inconsequential: They have a fly infestation in their compost bin, Beavan has some internal questions when he first turns off the electricity, and Michelle decides that it's simply too hard to use a planter pot as a refrigerator. But for the most part, the difficulties created by their lifestyle changes are romanticized away.

For instance, when Beavan first puts an organic wool diaper on his daughter Isabella instead of the disposable variety, the atmosphere is cute, with soft, soothing music throughout. His daughter laughs and smiles and says, "It's too fun." Beavan replies, "It's too fun." A "fun" sacrifice that's introduced but never revisited? How much less convenient was it to use a disposable diaper? How much extra time did it take? How difficult are the cloth diapers to clean, especially without a washing machine? Similarly, the practical difficulties of replacing toilet paper with cloth material goes unmentioned. The audience needn't see details, but at least report back.

Or consider the bathtub scene where Beavan and his daugther are washing laundry with their feet for the first time. They're having a ball and entice Michelle, the skeptical mom, to join in the fun. With sentimental piano chords in the background, Beavan pulls his wife close and, while laughing, kisses her gently. It's a great moment, as the reluctant wife is charmed by her goofball husband into enjoying this inconvenient activity. Ah, life is simple doing laundry with your feet in the bathtub. Again, hardly a representative sample. How many loads of laundry did they do with their feet that year?

Nobody wants to watch people changing diapers, walking to farmer's markets, and sitting around in the dark. Gabbert and Schein know how to take a seemingly inconsequential moment and make it special. Yet it's a puzzling choice for a movie that wants us to see what it would be like to go without. Perhaps it would have been more appropriate to show the 37th time the Beavans changed their daughter's cloth diaper instead of the first.

During the closing credits we do hear from Michelle about what she wants back, what she can do without, but we never hear from Colin. Is that simply because his list would undermine the point of the movie? Toward the end he asks whether there is hope for changing our cities into "nice places" (as if New York's swelling population isn't an indicator that more people want to live there). He addresses critics while pedaling through New York on his bike saying that these days, "There's such a lack of idealism, but I think realism got us where we are." It's unintentional, but this is Beavan's best insight. Realism, in the form of buying and selling stuff that's relatively cheap and easy, has gotten us where we are. People like Beavan can afford to live in New York City, start a blog, write a book, and make a film about their experience. That's a practical reality this idealistic film chooses to ignore. As a result, No Impact Man misses the chance to make an indelible impression.

Dan Hayes is a producer at Reason.tv. This column first appeared at Reason.com.

Green Buildings Not So Green

sam.staley@reason.org (Samuel Staley) — Tue, 01 Sep 2009 07:50:00 EDT

The New York Times reports on a survey of buildings that have been "certified" as LEED (Leadership in Energy and Environmental Design) by the U.S. Green Building Council. Gaining this certification allows building owners to get favored tax status, craft an image of enviornmental responsibility, and market their building to environmentally conscious tenants. Unfortunately, a lot of buildings don't actually do that much for the environment.

"The [Green Building] council’s own research suggests that a quarter of the new buildings that have been certified do not save as much energy as their designs predicted and that most do not track energy consumption once in use. And the program has been under attack from architects, engineers and energy experts who argue that because building performance is not tracked, the certification may be falling short in reducing emissions tied to global warming."

But, this isn't all. In turns out in the real world energy "efficient" buildings are small and don't have many windows.

But in its own study last year of 121 new buildings certified through 2006, the Green Building Council found that more than half — 53 percent — did not qualify for the Energy Star label [granted by the U.S. EPA] and 15 percent scored below 30 in that program, meaning they used more energy per square foot than at least 70 percent of comparable buildings in the existing national stock.

Anecdotal information from follow-up research to that study indicated that the best-performing buildings had limited window areas and tended to be smaller.

Nearly 2,000 buildings have already been LEED certified and more than 15,000 buildings are currently in the pipeline.

The problem is that the real world of construction doesn't match very well with the theoretical world of design.

"Council officials say that these other categories also help reduce energy use and emissions. And many architects and engineers praise the comprehensiveness of the label. But the wide scope of the program, many in the industry point out, also means that buildings have been able to get certified by accumulating most of their points through features like bamboo flooring, while paying little attention to optimizing energy use.

Another problem is that the certification relies on energy models to predict how much energy a planned building will use, but council officials and many experts agree that such models are inexact. Once a building opens, it may use more energy than was predicted by the design. And how a building is used — how many occupants it has, for example — affects its energy consumption.

“If the occupants don’t turn off the lights, the building doesn’t do as well as expected,” said Mark Frankel, technical director for the New Buildings Institute, which promotes improved energy performance in new commercial construction and conducted the research commissioned by the Green Building Council on LEED buildings.

“In the real world, the mechanical systems may have problems, so that increases energy use,” Mr. Frankel said, adding that keeping track of energy use is rarely a priority for owners.

Hmmm. Go figure.

Nissan Rolls Out Mass Production Electric Car

sam.staley@reason.org (Samuel Staley) — Fri, 21 Aug 2009 15:07:00 EDT

In case you missed this, Nisson Motor Co rolled out is mass production electric car in early August. The car is called "The Leaf," evidently symbolizing its green friendly technology and design as a zero-emission vehicle. Nissan was clear that their car is not designed for a niche market; it is intended to sell to a broad consumer base, will start selling in the $10,000 to $15,000 price range, and hit the showrooms in 2012.

"This car represents a real breakthrough," [Nissan CEO Carlos] Ghosn told reporters and guests at a showroom in the new headquarters.

He said the new car and new office building in Yokohama, southwest of Tokyo, marked two fresh starts for Nissan, which hopes to take the lead in zero-emission vehicles.

Nissan, which has an alliance with Renault SA of France, has fallen behind Japanese rivals Toyota Motor Corp. and Honda Motor Co. in gas-electric hybrids that have become increasingly popular recently.

Nissan said the new 22-story headquarters was designed to be sufficiantly energy efficient to qualify as one of the most ecological buildings in Japan. The company, which is losing money amid the global downturn, is selling its old Tokyo headquarters as part of efforts to cut costs.

Koizumi said environmentally friendly auto technology is key to Japan's economic growth.

This is just a little more evidence that efforts to curtail driving as a way to curb emissions is fruitless and pointless. The market will respond to rising consumer interest in zero emission vehicles (largely fueled by rising or expected increases in gas prices). We don't need draconian planning regulations to change lifestyles and shove people into inferior modes of transportation or housing.

We can have mobility and a cleaner environment. And its affordable too boot.

Public policy will be much more effective if it facilitates market-driven transitions rather than imposing outdated ideas about how people should live and move around town.

Euthanizing Cars Won't Heal the Economy or the Planet

shikha.dalmia@reason.org (Shikha Dalmia) — Wed, 12 Aug 2009 13:02:00 EDT

Our elected leaders were jumping for joy because they had managed to bribe clunker owners to trade in their old smokestacks for cleaner vehicles under the Cash-for-Clunkers programs. But will giving away free money really help the economy or the environment, I ask in my latest Forbes column?

"The program's basic idea involves paying owners of fuel-inefficient clunkers worth less than $4,500 a voucher up to the value of their vehicle toward a new, more fuel-efficient car on the hope that this will stimulate the moribund auto sector and slash carbon dioxide emissions. If you disregard the poor taxpayers financing it, everyone is a winner under this scheme.

"But that's only in the fantasy land on Capitol Hill.

"Edmunds.com, the nation's premier car-buyers' guide, debunked the stimulus claim even before the program was launched. It pointed out that even if the program succeeded in financing 250,000 cars in three months as originally planned, it would boost the economy as much as inducting Paris Hilton would boost the aggregate IQ of MENSA. That's because in any given quarter, about 200,000 such clunkers are traded in anyway. "In effect, we are paying customers to do something most would do anyway," noted Jeremy Anwyl, CEO of Edmunds.com. At best then, the program would drive about 50,000 additional trade-ins, which works out to a whopping $20,000 per clunker...."

"Department of Transportation Secretary Ray LaHood is going around touting the program as a roaring success because the government's list of the top 10 new purchases allegedly shows that drivers are trading in their gas guzzlers for fuel-sipping compacts in order to qualify for the full voucher. LaHood claims that the new vehicles are giving a combined average of 9.6 miles per gallon more than the trade-ins, delivering close to the maximum possible environmental bang for the buck.

"This convinced even critics of the original legislation, such as Sens. Diane Fienstein, D-Calif., and Susan Collins, R-Maine, to vote for its reauthorization. But there are two problems with this claim: One, even if one accepts LaHood's numbers, the fuel savings add up to only 72 million fewer gallons of gasoline every year--about what Americans consume in four and a half hours. This translates into 700,000 tons fewer carbon dioxide emissions annually--about what Americans emit every 57 minutes.

"Two, LaHood's numbers should not be accepted. Why? Because they are based on a false list of top 10 new purchases, an independent Edmunds.com analysis found. Indeed, the list that LaHood has been waving around, with the exception of a Ford Escape, contains mainly gas-sippers such as Toyota Corolla and Honda Civic with the holy Prius hybrid occupying the fourth place. But the list compiled by Edmunds.com contains two full-size, gas-guzzling SUVs and a crossover--with the Prius nowhere in sight. In other words, the program is effectively paying drivers to trade in their clunkers for--hang on to your recycled hats!--other clunkers. This undercuts LaHood's fuel economy claims by about 37%.

But there's more....."

Whole thing here.

New Jersey to Privatize Toxic Waste Site Cleanup

leonard.gilroy@reason.org (Leonard Gilroy) — Tue, 12 May 2009 18:55:00 EDT

Late last week, New Jersey Governor Jon Corzine signed into law a bill privatizing the remediation of nearly 20,000 contaminated properties in the state. Per the Philadelphia Inquirer:

New Jersey will overhaul a troubled state program to clean up toxic-waste sites by allowing licensed private consultants hired by polluters to both determine how to clean up the properties and certify they are safe, under a controversial bill signed into law by Gov. Corzine yesterday.

The law revamps the overburdened Site Remediation Program of the Department of Environmental Protection. The program, which has been described as broken by state officials and lawmakers, has a backlog of about 20,000 contaminated sites, ranging from homeowners' leaky oil tanks to Superfund sites.

The governor also signed a related executive order yesterday that, among other steps, strengthens the role of the DEP in some cases. The order requires the DEP to increase its oversight at certain sensitive sites, including land that may be used for housing, schools, day-care facilities, playgrounds or athletic fields.

Corzine said the new law and the executive order "will cut though the bureaucracy to streamline the cleanup process and allow more than 19,000 contaminated sites to be evaluated more quickly."

The most interesting part of the article discussed the rationale for privatization:

Modeled after a program in Massachusetts, the law allows parties responsible for cleaning up polluted sites - in some cases the polluters themselves, in other cases property owners who have inherited the responsibility - to hire licensed consultants for the cleanup work. The administration proposed the program as a way to clean up sites faster and return them to tax rolls while limiting the expense to taxpayers.

Supporters say the law would establish mandatory time frames for cleanups for the first time, and hold environmental consultants to higher standards. The law provides enforcement actions to be taken against consultants who violate state law.

Proponents say the law will expedite cleanups at thousands of sites across the state, helping the economy and the environment. "The licensed site professional program is exactly the kind of forward-thinking problem-solving we need in New Jersey," said Philip Kirschner, president of the New Jersey Business and Industry Association. "It harnesses the resources of the private sector in a way that will provide a tremendous benefit to the public, both in cleaning up polluted properties and stimulating the economy."

Assemblyman Albert Coutinho (D., Essex) said the law would help the state's site-remediation program operate more efficiently. "Licensed professionals will take over many of the more time-consuming functions that have boggled down the DEP," Coutinho said.

As is the case with many other privatization initiatives, this is about policymakers trying to gain control over the delivery of an inefficiently-run government service, not relinquish it, as privatization opponents often falsely claim (the Sierra Club, in this case). It's clear that New Jersey policymakers plan to hold the private sector to a much higher performance standard than the state has been able to achieve. And let's not forget accountability—unlike a government agency, companies that fail to perform will lose their contracts.

It never ceases to amaze me how much the game can change when you properly align private sector incentives towards generating the desired public sector outcomes.

UPDATE: The Sierra Club is planning on challenging the new law, which leads me to posit a question citizens should be asking the antis in the environmental advocacy community: if the end result is better, cheaper, and faster remediation of thousands of toxic sites, then why would they care whether that work was performed by a private company?

USDA Tries Pricing and Trading Environmental Benefits

info@reason.org (Katie Hooks) — Mon, 26 Jan 2009 06:16:37 EST

In a new column, Reason Foundation's Skaidra Smith-Heisters says that bringing ecosystem services out of the political realm and into the market would be welcome news. Smith-Heisters writes:

The announcement that the United States Department of Agriculture (USDA) is creating a new Office of Ecosystem Services and Markets was largely overlooked in December amidst the recession and presidential transition. The importance of the announcement was not lost, however, on editors at The Katoomba Group, whose Ecosystem Marketplace website is the largest clearinghouse of information on markets and payment schemes for ecosystem services. There, the creation of the Office of Ecosystem Services and Markets was welcomed as "part of a massive realignment of the management of natural resources." USDA is already far too big and has not served taxpayers well. The agency specializes in doling out entitlements, administering corporate welfare, increasing the cost of food for consumers, and generally ensuring that the nation's agricultural sector operates in a bubble untouched by the realities of the market. However, the new ecosystem and markets program offers a little bit of hope for an agency that is otherwise hostile to free markets.

Read the whole column here.

Pocketbook policy: SFpark

skaidra@reason.org (Skaidra Smith-Heisters) — Tue, 18 Nov 2008 22:10:23 EST

From today's San Francisco Chronicle: Parking at a curbside meter in San Francisco could cost up to $18 an hour - or drop as low as 25 cents - under an experimental plan approved Tuesday at City Hall to set rates based on demand. The idea behind the project is to use pocketbook-policy to alter the behavior of drivers and reduce congestion.
In an article earlier this year about San Francisco's parking pricing scheme, UCLA parking expert Donald Shoup explained: "Every city I go to thinks they're unique, but one thing that's the same is the parking problem. It's not a green policy to put solar panels on buildings and have people circling their block for hours." "The only reason people are driving around in circles in New York and San Francisco is that the price of curb parking is so much lower than adjacent off-street parking, and if you want to park for an hour it's a lot cheaper to drive around for 10 minutes looking for a spot."
And hey, if pricing can work for parking, why not bridges?

Governors' Global Climate Summit makes case for baskets

skaidra@reason.org (Skaidra Smith-Heisters) — Mon, 17 Nov 2008 15:03:17 EST

Day one of the Governors' Global Climate Summit was staged like an awards ceremony for the end of global warming--complete with crescendoing musical entry queues and an acceptance speech from leading actor, Gov. Schwarzenegger, in which he likened his wife to an "environmental Gestapo" and warmly celebrated the incoming Obama administration, despite having campaigned against the man just two weeks ago--and concluded with a panel discussion on the "sectoral approach" to reducing greenhouse gas emissions. For anyone watching this made-for-TV special at home without the appropriate decoder ring, the term "sectoral approach" might not mean much. Similarly innocuous-sounding were remarks from Diane Wittenberg, executive director of The Climate Registry, about how the United States won't be able to reach a goal of 80 percent reduction in greenhouse gas emissions below 1990 levels without a "basket." The reason these terms are important is that they indicate a significant--if not wholly unexpected--change of direction for domestic climate change policy, away from market-based mechanisms and toward heavily bureaucratic, prescriptive regulation, targeting the transportation sector in particular. Compared to the science behind anthropogenic climate change, whether to bail out auto companies, or any number of other political debates, the support for a cap-and-trade approach to greenhouse gas abatement has been broad and nonpartisan. (Yes, economists favor tax-and-credit systems that accomplish essentially the same goals but with greater price stability, but politicians evidently find these unpalatable--policy advisers in the European Union sought a carbon tax for five years until giving into the political preference for cap and trade communicated at the Kyoto climate change conference.) Cap and trade for greenhouse gas emissions is also one of the most widely embraced emerging market-based mechanisms in environmental policy outside of climate and energy issues. The agenda for today's panel on "sectoral approaches" read: This panel will discuss the importance of both targeted actions to reduce emissions and partnership opportunities for partnership between developed and developing state and provincial governments. Such targeted actions can take the form of technology transfer, best practices sharing, and market-based approaches to reducing emissions or other actions that provide mutually beneficial outcomes. These actions are not intended to displace the existing successful efforts to create a highly credible offset market, establish economy-wide caps on emissions, or any other actions by our respective states and provinces or federal governments.
There's nothing wrong with sharing and mutually beneficial outcomes, but the real agenda of targeted sectoral approaches is potentially much more heavy-handed than this description implies. These approaches might not entirely displace carbon markets under an economy-wide emission cap, but they certainly could undermine the effectiveness of such markets. Displacement of markets by direct regulations is inherent to California's greenhouse gas abatement program, for instance. California's Global Warming Solutions Act (AB 32) allows for the state to adopt market-based compliance mechanisms, which it defines as: (1) A system of market-based declining annual aggregate emissions limitations for sources or categories of sources that emit greenhouse gases. (2) Greenhouse gas emissions exchanges, banking, credits, and other transactions, governed by rules and protocols established by the state board, that result in the same greenhouse gas emission reduction, over the same time period, as direct compliance with a greenhouse gas emission limit or emission reduction measure adopted by the state board pursuant to this division.
--Plus AB 32 contains a proviso that any market-based compliance mechanism achieve reductions that are "in addition to any greenhouse gas emission reduction otherwise required by law or regulation, and any other greenhouse gas emission reduction that otherwise would occur." Drew Kodjak, executive director of The International Council on Clean Transportation, explained in today's panel that his organization supports the "sectoral approach" because cap and trade would "leave transportation virtually untouched." In other words, cap-and-trade programs only engineer one outcome: the total amount of emissions, irrespective of the sector, industry, or firm they come from. (The sectors used in accounting for emissions are somewhat artificial anyway, and the line between the electricity and transportation sectors will dim as transportation becomes increasingly electrified.) Many analysts expect that the price of carbon permits would have to be fairly high before it spurred significant reductions in the transportation sector--instead, reductions would come from other, cheaper sectors. That's fine if the goal is simply to reduce greenhouse gas emissions to a specified level, but if the goal is to eliminate the gasoline vehicle at any cost, that's where the basket comes in. "Basket" and "sectoral approach" in this case both mean adding layers of direct regulations such as technological prescriptions, performance standards, and land use controls, and additional penalties in the form of carbon fees and taxes on top of any cap-and-trade program. ("Basket" has another meaning in greenhouse gas regulatory parlance, generally in reference to the weighted sum of the six major greenhouse gases, which is more closely related to the meaning of the financial use of the term.) California's climate change policy is shaping up like a basket, and despite the nice talk about not displacing carbon markets, heading in this direction means that there will soon be little left outside the basket for a viable cap-and-trade scheme.

FLOW: For Love of Water...as long as it's not bottled, processed or delivered by a for-profit company

skaidra@reason.org (Skaidra Smith-Heisters) — Sun, 16 Nov 2008 17:21:39 EST

The celebrated new environmental scare-umentary, FLOW: For Love of Water, won't come to a theater near me until next month, so I've only seen the preview and the video produced by Nestle Waters (evidently the villain in this telling of the story) in their own defense. Noah Hall, one of the experts featured in Nestle's retort, offers a good critique of the movie on his blog, and summarizes:

What disappointments me most about the movie FLOW is that it feeds the ideological opposition to water bottling and water privatization at the expense of focusing attention on the real threats to our water. For example, as just reported by John Flesher of the Associated Press (see Chicago Tribune story), some environmental activists in Michigan are considering a ballot initiative to affirm public ownership of water and restrict water bottling, using the release of the movie to build attention for the cause. But this response does nothing to solve the problems of unsafe drinking water and chemical pollution of our lakes and rivers highlighted in the movie.

The perceived bottled water menace has been a topic here more than once before. There's been valuable push-back in the bottled-water-brouhaha on other fronts lately, as well. [Side note: I'm looking for an explanation of the incongruous inclusion of a quote from T. Boone Pickens at the end of the preview, in which he tells the camera, "People say, 'Water's a lot like air, you shouldn't charge for water.' Well, OK, watch what happens." All I can figure is that the man has some uncanny influence in person that makes normally-critical interviewers go gaga. Thankfully, that influence did not extend to the polls in California, where the Pickens-backed Proposition 10 was resoundingly rejected two weeks ago.]

Farmers vs. Feds

skaidra@reason.org (Skaidra Smith-Heisters) — Wed, 12 Nov 2008 18:00:37 EST

This week the 8th U.S. Circuit Court of Appeals heard arguments in a case that retests the federal role in marijuana regulation through the Commerce Clause of the Constitution. In the 2005 Gonzales v. Raich decision, the Supreme Court ruled that the federal government's interest in controlling marijuana grown legally under state law for personal medical use was legitimate, because the product of such legal activity could enter into illegal interstate commerce even if that was demonstrably not the intention of medical patients and their caretakers. In round two in the saga of marijuana and the Commerce Clause, Monson v. DEA, farmers in North Dakota seek to prove that the federal government has no legitimate interest in regulating hemp grown legally under their state law, because the only product with the potential to enter interstate commerce in this case is a legal commodity. Hemp products, derived from the non-drug variety of marijuana, are not regulated under the Controlled Substances Act. The living plant and viable seed are regulated, though, so farming hemp on U.S. soil for an industry worth tens of millions of dollars in North America is not permitted by the DEA. Under North Dakota law, the living (thus regulated) hemp plant would not leave the farmers' fields, much less the state. This time around, proponents argue:

Certainly, Congress could choose to regulate interstate commerce in hemp stalk, fiber, non-viable seed and oil. However, Congress has expressly chosen not to regulate interstate commerce in those goods. As a result, any discussion of whether Congress could also choose to regulate intrastate commerce in those same commodities is precluded by the fact that Congress has explicitly chosen not to regulate even interstate commerce in those goods. It stands to reason that Congress, having chosen not to regulate interstate commerce in a class of products, cannot constitutionally regulate intrastate state-regulated licensed activity that results only in putting that same class of products into commerce. In this case, this state-regulated activity presents no possibility of drug marijuana flowers being diverted–the congressional interest under the CSA. [...] As explained by the farmers in their Complaint, there is simply no rational, factual basis to conclude intrastate industrial hemp production impacts the interstate drug marijuana market. Therein lies the critical distinction between this situation and that in the California medical marijuana case, Gonzales v. Raich, 545 U.S. 1 (2005), on which the District Court principally relied.

The recording of the oral arguments is worth a listen. The decision in the case will come sometime next year.

Green idealists aren't so green

sam.staley@reason.org (Samuel Staley) — Wed, 24 Sep 2008 06:35:17 EDT

Our friends over at NCPA alerted us to a new study from the U.K. finds that concern for the environment increases with income, but high income families have lifestyles that are the most carbon intensive.

People who believe they have the greenest lifestyles can be seen as some of the main culprits behind global warming, says a team of researchers, who claim that many ideas about sustainable living are a myth. According to the researchers, people who regularly recycle rubbish and save energy at home are also the most likely to take frequent long-haul flights abroad. The carbon emissions from such flights can swamp the green savings made at home, the researchers claim.

For the complete article from the Guardian, click here.

Water PPPs Offer Financial, Environmental Compliance Solutions

leonard.gilroy@reason.org (Leonard Gilroy) — Tue, 23 Sep 2008 15:45:11 EDT

Another from the "PPPs aren't just for roads" file (see this one earlier this week on schools). From Virginia, an interesting new muti-jurisdictional water PPP:

A group of investors seeking a partnership with the towns of Cape Charles and Cheriton is moving forward with plans to build a state-of-the-art wastewater treatment plant and a new water distribution system to serve area residents, businesses and two industrial parks they are developing. [. . .] Cape Charles dumps its treated wastewater, or effluent, directly into the bay. The state environmental agency has required the town upgrade their plant by Jan. 1, 2011. The same deadline applies to plans for a central system for the town of Cheriton, which could not afford to build its own system because the population of the town hovers around 400. So the three parties are getting together and forming a public-private partnership to design, build, finance, maintain and operate water and wastewater systems that will serve residents and businesses in the two towns, and possibly beyond, and also the industrial needs at the Webster site, which sits partially in the county. Such ventures are formed under the authority of the state's Public-Private Educational Facilities and Infrastructure Act of 2002, or PPEA. The intent of the act is to provide a structure so public projects can benefit from the involvement of the private sector, saving time and money. The law creates resources to fund a broad range of projects, from schools to water treatment and telecommunications. It helps localities reach goals and encourages innovative approaches to financing.

This is a great example of how PPPs offer solutions as public entities face growing infrastructure needs and worsening fiscal conditions. In fact, it's apparent from this article that one of the drivers behind this deal is environmental compliance. Regs are getting tighter soon, and the cities don't have the money to get in compliance on their own, so they're pursuing a PPP to accelerate the project; pool their resources to make a more attractive, larger scale project; and get 'er done before the regs kick in. Expect to see more interest in water PPPs in coming decades. The feds have been reducing their contributions to local water systems over the several decades, at the same time that they're imposing stricter water quality and effluent standards under the Clean Water Act and Safe Drinking Water Act. Unfunded mandates of this nature are forcing fiscally-strapped municipal systems to meet federal regulations through local sources of revenues or state revolving loan funds, but as we all know, government revenues are drying up and budget shortfalls are reaching epidemic status. So that leaves PPPs as one of the few nontraditional, creative options left on the table to help municipalities meet these obligations. And Virginia's PPEA is one of the great pieces of state legislation to facilitate these solutions. After the success of its big brother, the Public-Private Transportation Act of 1995, or PPTA (facilitating transportation PPPs, like the Capital Beltway HOT lanes project currently underway), the legislature wisely opted to put legislation in place to facilitate PPPs in other realms of infrastructure. [they even still refer to PPEA in the Commonwealth as the "Public-Private Everything Else Act"]. We're fortunate to have welcomed the PPTA's author, former Virginia DOT secretary Shirley Ybarra, into Reason's policy shop last year, and I'm sure she takes a certain amount of pride knowing that her work carving new ground on transportation finance and procurement has ultimately played a big role in providing options for munis in delivering water and other types of needed infrastructure. Another observation here is that we may be at the very beginning of a shift in water privatization. The standard way of doing business up to this point has been to partner with the private sector largely on operations & maintenance. The private team may design and build the plant too, or they may just take over operations of an existing facility, but to date the focus has not been on private financing in water infrastructure. But this Virginia project, a similar project under discussion in the Prescott, AZ area, and several others in recent years may be an early indicator that the more powerful PPP contracting models we see in roads, for example—where the private sector competes for the right to design, build, operate, maintain, as well as finance, infrastructure projects through longer-term contractual arrangements—may be coming to the water industry. Not that we'll see a major shift away from traditional operational contracting in water; the point is that even looking within the relatively narrow space of water privatization, models are evolving, and new opportunities are emerging that may look way different than they did even a decade ago. As more elected officials discover that there's a robust competition in the market for privately-financed road projects, they are naturally looking to similar opportunities in other sectors. And the $150B+ in private equity capital raised on Wall Street and within pension funds, etc. to invest in infrastructure are likely more interested than ever in diversification among assets. So it makes sense that we'll see them interested in spreading their resources around to invest in several infrastructure subclasses, including roads, airports, water, wastewater, energy, ports, schools, etc. This may take some time in water since current privatization models are so well-established and successful, but I do think we'll see growing interest in that evolution towards incorporating the financing component into the PPP models. And with public ledgers running redder and redder, and the maintenance and new capacity needs in water growing greater and greater, the sooner we start to engage that discussion and get some projects up and running, the better. » Reason FAQ on Water/Wastewater Privatization » Reason's Water Privatization Research and Commentary

The Benefits of Privately Financed Water Infrastructure

leonard.gilroy@reason.org (Leonard Gilroy) — Sat, 13 Sep 2008 07:11:22 EDT

KPMG Global Infrastructure's Bastien Simeon offers an excellent overview of the evolving water privatization market in an August 2008 report entitled, "Delivering water infrastructure using private finance." The paper examines the risks and rewards of using private finance to fund water infrastructure, including how local governments and investors can benefit. Topics covered include regional trends, traditional vs privately financed procurement, opportunities, risk allocation and extracting value. Here's an excerpt on what I've found to be a woefully underappreciated issue in infrastructure--the chronic neglect of infrastructure maintenance seen under traditional U.S. project delivery approaches, and the opportunities PPPs offer in locking in future asset maintenance costs and shifting to life-cycle approaches to ensure asset quality and durability:

The traditional infrastructure procurement method used to budget construction, enhancement, maintenance, and/or operation of water facilities may result in suboptimal outcomes. That's because most government budgets are based on a one or two year budget cycle for operating costs, with capital projects subject to a five-year work plan. Often, governments may find themselves pressured to balance the budget by incrementally deferring maintenance or deferring capital projects–a process that may appear innocent on a project-by-project basis. But the exponential nature of deferring maintenance or capital projects over time can result in breakdowns in infrastructure or capacity shortages that compromise public needs. Once a government gets behind in maintenance, it becomes very difficult to recover. The government is then put into a position of choosing between maintaining or rehabilitating existing infrastructure or building capacity necessary to fuel the growth in its economy. This dilemma can lead to unintended maintenance backlogs, substandard service quality, and life-cycle costs that are considerably higher than would have been achievable with optimal maintenance. [. . .] The long-term nature of concession and PPP contracts allows governments to build maintenance costs into the net present value of the monetization and assign responsibility for maintenance to the private sector. The private sector can plan and implement accordingly, since it focuses on the long-term internal rate of return, not the current-year budget cycle that can compromise service quality. This long-term approach, often referred to as life cycle asset management, can be reflected in the innovative design and construction solutions for privately funded water facilities, such as using more expensive construction materials that may increase the investment cost but decrease the longer-term maintenance costs, thereby decreasing the total net present value of the project. Governments also have the ability to impose strict operations and maintenance requirements in concession agreements and lock in future maintenance costs. While this approach may decrease upfront payments from private concessionaires, governments can effectively remove the responsibility for maintenance from their budgets and thus not make those costs subject to year-to-year budget pressures.

» Reason's Water and Wastewater Research and Commentary

Tax Hikes vs. Privatization For Water Infrastructure

leonard.gilroy@reason.org (Leonard Gilroy) — Tue, 02 Sep 2008 10:24:16 EDT

In a Carlsbad Current-Argus op-ed last week, Rio Grande Foundation president Paul Gessing comments on a Carlsbad, NM ballot measure seeking a 0.5 percentage point increase their gross receipts tax to fund water infrastructure. He raises an important question Carlsbad taxpayers should be asking: why isn't the city looking at privatization and public-private partnerships?

The City expects to raise approximately $45 million from the tax hikes with the money to be allocated for a several water-related projects around town. Carlsbad is not alone in struggling with the expense of maintaining its water system. According to the U.S. Conference of Mayors, capital expenditures on water and wastewater services are the largest issues facing local governments today. Perhaps, with the City's water system in such dire need of repair, voters, by saying "no" to this tax increase, could force Carlsbad's political establishment to consider privatization? [. . .] Across the country privately provided water saves customers an average of 25 percent over government-operated water. Inefficiencies of government-owned water companies go beyond cost to consumers. Their operating expenses per connection are 21 percent higher and the public utilities required more than double the number of employees per connection. Accordingly, salaries of public water companies ate up almost three times as much of the operating revenue as the private companies. Public companies also spent nearly double their private counterparts on maintenance. While water privatization has traditionally focused on construction and operations, we're starting to see private sector companies coming to the table with financing as well. Over $100 billion has been raised in the global capital markets to invest in infrastructure assets like roads, ports, and water systems. In Pima County, Arizona, officials are currently pursuing a $300 million upgrade of the county's 50-year-old sewage treatment system using private financing. Prescott-area officials are currently exploring private financing to build a state-of-the-art, multi-jurisdictional water transmission system. The truth is that politicians – even in relatively taxpayer-friendly cities like Carlsbad – will often choose the path of least resistance (higher taxes) over more fundamental and ultimately better reforms that use free market principles to reduce costs. After all, though privatization has been used across the nation to improve service and cut costs, it is "new" to Carlsbad. Fortunately, Carlsbad taxpayers have a say in this issue at the ballot box. Rather than blindly going along with a big tax hike that will ultimately harm Carlsbad's economic competitiveness, voters should demand that their elected officials carefully consider options like privatization.

Gessing makes an excellent point. Raising general taxes to fund water infrastructure should be a last resort, not the first go-to option. Rather than the people in Carlsbad today paying for water assets that benefit many people now and into the future, it makes more sense to finance long-lived, big-ticket infrastructure assets so that those who benefit from the improvements pay for them as they use them over the asset's useful life. And with literally hundreds of billions available in the private capital markets to invest in infrastructure, it is irresponsible for policymakers to not even explore the innovative finance options that other cities have taken advantage of through privatization. » Rio Grande Foundation » Reason's Annual Privatization Report 2008: Water & Wastewater update » Reason's Water/Wastewater Research and Commentary

Polar Pawn

skaidra@reason.org (Skaidra Smith-Heisters) — Mon, 01 Sep 2008 13:58:08 EDT

As thoroughly obvious as it is that the federal Endangered Species Act is employed more often to secure political benefits than actual benefits to wildlife, it is still a little surprising to see a quote like this in the press: "Basically we said, 'List the polar bear, and when you list the polar bear, you're going to have to do something about greenhouse gas emissions.' The fact all these other parties are suing over it shows the Bush administration doesn't have a legal leg to stand on -- they know the administration has to do something about greenhouse gas emissions."

-- Kassie Siegel, climate program director, Center for Biological Diversity

That statement comes from a Washington Post article over the weekend, investigating the exemption of Alaska from a rule intended to protect the rest of the states from greenhouse gas emission regulation as a result of the listing of the polar bear. From a scientific standpoint, the exemption makes no sense, since of course emissions in Alaska are no more or less likely to effect polar bears than emissions anywhere else on the globe. Bjorn Lomborg, special guest at the upcoming Reason Goes Hollywood event, has a cooler take on these unfortunate pawns in the global warming debate.

Paper or plastic--or else!

skaidra@reason.org (Skaidra Smith-Heisters) — Mon, 25 Aug 2008 11:05:47 EDT

The Sacramento Bee is editorializing today to promote the proposed 25-cent California grocery bag tax, AB 2769 (Levine). They've got a mix of fact and fiction (e.g. paper and plastic grocery bags recycling rates were 25 and 9 percent, respectively, in 2006 and rising--more than double the editorial's claim) in the lead-up to this unfortunately-worded conclusion:

AB 2769 would provide shoppers with a choice: Bring reusable bags or pay the true cost of a disposable bag.

The editorial also calls the tax the "market-based solution." Just to set the record straight: there already is a market for grocery bags, and on average most consumers already pay the true cost of grocery bags. What is being proposed is arguably more "market-based" than an all-out ban, but saying that it provides shoppers with a choice is just cruel. If and when this tax is approved, it will not benefit shoppers. Contrary to the Sac Bee editorial, the proposed bag tax is also unlikely to save grocery stores money. If charging for bags saved grocery stores money, they would have done so long ago--they, too, have choices--without any legislative help from Sacramento. The extra time it takes to charge for bags (as a proxy, think of just the amount of time it takes to make change) and handle home-brought bags will probably eventually cost grocery stores more than the kick-back they'll get from the bag tax, and that cost will be paid in higher food prices. Browse Reason Foundation's ongoing coverage of the great grocery bag debate here.

California Seeks to Reduce Driving and End Sprawl

chris.mitchell@reason.org (Chris Mitchell) — Mon, 25 Aug 2008 07:52:20 EDT

Reason's Sam Staley looks at California's latest plan to curb emissions in his latest column:

The state government has decided Californians are going to drive less, whether they like it or not. Want to buy a Prius or insulate your home as your contribution to lowering carbon emissions? Sorry, but that's not doing enough for the government's tastes. California wants politicians and planners to have a bigger say in where you live, shop and work so that they can make sure you don't drive that Prius too far. Senate Bill 375 is the state's latest far-reaching piece of legislation intended to help to meet one objective: reduce greenhouse gas emissions by 30 percent by 2020. To cut emissions, the government will take a more active role in where you live, how you get there, and what kind of home you live in. While this legislation thankfully stripped away specific regional targets that would have been far more draconian, the core governing values underlying California's approach should sound alarms in and out of the state. Analysis prepared by the California Senate notes the legislative intent of the bill is to integrate housing planning with regional transportation planning. Regional planners are supposed to determine housing needs and use statistical modeling to "allocate housing units within the region consistent with the development pattern included in the SCS [sustainable communities strategy]." A sustainable communities strategy is planning jargon for reducing carbon dioxide. It's the only criterion that counts in SB 375. Neighborhoods could become mired in crime, failing infrastructure, and poor schools, but if they reduce carbon dioxide emissions they would be considered sustainable and conform to the SCS. This is Sacramento's idea of "smart growth." An outcome as dire as this isn't as far flung as it seems. The way California communities are expected to achieve lower carbon dioxide levels is by dramatically reducing mobility. Automobiles and light trucks, the legislation claims, emit 30 percent of the state's greenhouse gas emissions. So the solution is to reduce driving, measured by vehicle miles traveled. Such a grand, sweeping overhaul of land development will have significant negative consequences. Mobility will be greatly reduced since public transit (and walking) almost always takes significantly longer to reach destinations than automobile travel in California. Economic productivity will fall because companies will have access to fewer qualified workers within acceptable commuting distances. Job mobility will be limited since changing jobs will likely entail moving an entire household to a new home to avoid inordinately long commutes. Fortunately, California planners can't outright ban the use of cars - yet, or limit them to particular groups of people, as they do in places such as Singapore. Instead, cities and counties are required to achieve their greenhouse emissions targets using the obtuse and indirect method of changing land use. In other words, communities are expected to make driving so difficult and expensive that people will either walk or use transit. Politicians in Sacramento don't seem bothered by the fact that driving a hybrid automobile, such as the Prius, beats every public transit mode on carbon dioxide emissions except heavy rail. Regional planners nevertheless are supposed to use their models to dramatically increase residential densities, and use smart growth planning to funnel new growth into "transit priority projects." A transit priority project must have a minimum density of 20 dwelling units per acre, a standard that effectively prohibits single-family homes with a yard. Dramatically reducing automobile use means stuffing families into dense urban-living environments. Goodbye house, hello high rise. You didn't really want a yard (or a car) anyway.

Full Column

Looking for Cost-Effective Climate Change Solutions

chris.mitchell@reason.org (Chris Mitchell) — Mon, 18 Aug 2008 07:57:31 EDT

In The Wall Street Journal's LiveMint today, Reason's Shikha Dalmia writes:

The longer we wait, the cheaper and less painful it might be to deal with global warming. That is the thinking of a growing number of economists – most prominent of whom is Gary Becker, a Nobel laureate at the University of Chicago. Under most scenarios, global warming won't be a sudden and catastrophic event like, say, an asteroid hitting the earth that will wipe us all out in one fell swoop if we don't do whatever it takes – regardless of cost – to avert it. By the UN climate change panel's own reckoning, most of the effects of global warming won't be felt for another 50 years and then too, they'll unfold gradually and spottily – affecting some places more than others and even making some currently inhospitable tundras more livable. Under such circumstances, it might well make more sense to postpone action on global warming. Becker explains why. Suppose we do nothing about global warming, then 50 years from now we suffer $2 trillion in damages. The question then becomes, how much would it be rational to spend now to avert that future damage? One way to answer that would be to apply a discount rate on $2 trillion. Assuming, very conservatively, a return on capital of 3%, then $500 billion today would equal $2 trillion after 50 years of compounded interest. Thus, if the cost to us of averting global warming today is significantly more than $500 billion, say $800 billion, it would be better to invest that money in physical capital rather than in steep emission cuts. In 50 years, that $800 billion would grow to $3.5 trillion – enough to offset the $2 trillion damages – and still leave future generations richer! (It is not for nothing that Albert Einstein reportedly called compound interest as "the most powerful force in the universe"!) This argument has generated a lot of discussion in America and the West, but it is of even more relevance to the faster growing economies in the developing world. All estimates about the costs of dealing with climate change are pure speculation at this stage. But let's just consider the UN's estimates: They put the cost of just stabilizing carbon dioxide emissions at 550 parts per million (ppm) at up to 3.2 % of the current global GDP or $1.7 trillion. Compounded at a 3 % interest rate over 50 years, this works out to about $7 trillion. But, not all countries will lose this wealth at equal rates. Given that India and China are experiencing more rapid economic growth than the West right now, their returns on physical investments are likely to be closer to 4-5% and the West's 2%. This translates into two-and-a-half to four times greater future losses for India and China for every dollar they spend now. What's more, while this lost growth will pose only quality of life issues for the West, it will pose existence of life issues for India and China. Indeed, the loss of investments in physical capital such as roads, sewerage, water-treatment plants, manufacturing, pharmaceuticals, won't just mean lower wages or smaller homes as in the West. It will mean more unemployment, poverty, hunger, disease and death. In short, if India and China succumb to Western pressure to divert precious resources to fight global warming now, many members of the generations for whom this war is being waged might not even come into existence.

Reason Foundation's Environment Research Reason magazine's Climate Change Commentary

Ethanol Craze: Corn Is For Food, Not Fuel

chris.mitchell@reason.org (Chris Mitchell) — Tue, 12 Aug 2008 11:48:51 EDT

Politicians are going crazy for ethanol, touting it as a cure-all that will reduce both pollution and our dependence on foreign oil. But a new Reason.tv video shows ethanol subsidies are costing taxpayers a massive $8 billion this year and that as much as 60 percent of the increase in world food prices can be blamed on biofuel subsidies. "Ethanol is bad for taxpayers, bad for the environment, and horrible for the world's poor," Nick Gillespie, editor of Reason.tv, declares in the video. We are paying more for beef, milk, and eggs because the ethanol craze has increased demand for corn, driving up prices and diverting corn that used to go towards food products and feeding livestock. "We are in the midst of a world food crisis. Several million people are on the edge of starvation because we are turning food into fuel. The amount of corn that it takes to produce a 20 gallon tank of ethanol could feed one person for an entire year," Reason magazine Science Correspondent Ronald Bailey says. Full Video: Silly Senator, Corn Is for Food! Archive of Reason.tv's Drew Carey Videos 2003 Reason Foundation Study: Is a Federal Ethanol Mandate Worth It? (.pdf)

The Role Our Cars Are Playing in Global Warming

chris.mitchell@reason.org (Chris Mitchell) — Tue, 12 Aug 2008 11:35:42 EDT

High gas prices are reducing the amount of driving Americans do. Reason's Skaidra Smith-Heisters' new column looks at the role our cars play in global warming:

Personal transportation is unduly targeted for emission reductions at the onset as an accident of how we account for greenhouse gas emissions. We're frequently told that the transportation sector is the largest contributor of greenhouse gas emissions in the United States, but this is a misleadingly statement. The U.S. Environmental Protection Agency (EPA) inventories emissions in six main categories-electricity generation, transportation, industry, agriculture, commercial and residential. When inventoried in those categories, electricity generation is the largest source of greenhouse gas emissions (34 percent in 2006), followed by transportation (28 percent), industry, agriculture, commercial, through to the smallest sector, residential (5 percent). Electrical power is an industrial product "consumed" by the other economic sectors, however, so the next step EPA reports is a calculation of emissions with electricity generation allocated among the five smaller sectors. After these emissions are distributed, "industry" accounts for the largest share of greenhouse gas emissions (29 percent in 2006), followed by transportation (28 percent), commercial, residential and agriculture (8 percent). This simple example shows how the categories in which emissions are reported in has a large influence over how each economic sector is perceived. Distributing emissions from the electrical power industry dramatically changes the respective contribution of the other sectors, with the exception of transportation, where a nearly insignificant amount of rail transportation contributes a small amount of electricity to the mix. Transportation is "consumed" by the other sectors, just as electricity is, but the accounting method just lumps together passenger cars, light-duty trucks, sport utility vehicles, commercial trucks, domestic aviation, military aircraft, commercial and recreational boats and emissions from all other modes of motorized transport. Even with commercial, personal and other kinds of transportation included in one sector, it still doesn't add up to the "largest share" of total U.S. greenhouse gas emissions. Rather, it is the largest share of carbon dioxide (CO2)-the dominant greenhouse gas-from fossil fuel combustion-the main source of anthropogenic CO2. Weighted for global warming potential over a 100-year time horizon, EPA reports that CO2 from fossil fuel combustion accounted for approximately 80 percent of U.S. greenhouse gas emissions in 2006. The other 20 percent, including CO2 from industrial processes, methane from livestock and landfills, nitrous oxide from agriculture, and some chemical solvents and propellants, should not be overlooked in greenhouse gas reduction strategies-in fact, these categories provide some of the quickest and least expensive opportunities for emission reductions. Household vehicle use currently is responsible for a much smaller portion of U.S. greenhouse gas emissions, 16-18 percent, than is commonly believed. What is vastly more important than the relative amount of greenhouse gas emissions from this sector, however, is the utility provided by passenger cars and light-duty trucks and the opportunities that lie ahead for reducing the greenhouse gas intensity of personal motorized transport while maximizing utility.

Full Column Here

Ethanol Subsidies Cost Taxpayers $8 Billion This Year

Mon, 11 Aug 2008 00:00:00 EDT

Los Angeles (August 11, 2008) - Politicians are going crazy for ethanol, touting it as a cure-all that will reduce both pollution and our dependence on foreign oil. But a new Reason.tv video shows ethanol subsidies are costing taxpayers a massive $8 billion this year and that as much as 60 percent of the increase in world food prices can be blamed on biofuel subsidies.

"Ethanol is bad for taxpayers, bad for the environment, and horrible for the world's poor," Nick Gillespie, editor of Reason.tv, declares in the video.

We are paying more for beef, milk, and eggs because the ethanol craze has increased demand for corn, driving up prices and diverting corn that used to go towards food products and feeding livestock. "We are in the midst of a world food crisis. Several million people are on the edge of starvation because we are turning food into fuel. The amount of corn that it takes to produce a 20 gallon tank of ethanol could feed one person for an entire year," Reason magazine Science Correspondent Ronald Bailey says.

And those far-reaching environmental benefits that politicians promised? It turns out they were wrong. "Ethanol is much worse for the environment than gasoline," states Bailey. "As some studies suggest, you put more energy into producing ethanol than you get out of it when you burn it."

Full Video Online

The Reason.tv video, Silly Senator, Corn is for Food! is online at http://www.reason.tv/video/show/462.html. An archive of Reason.tv's Drew Carey videos can be found at http://reason.tv/featuredvids/.

About Reason.tv

Reason.tv is an online community showcasing the best libertarian ideas and videos on the Internet. Reason.tv gives you the opportunity to create videos, share videos and suggest topics for Drew Carey's upcoming documentaries. For more information, please visit www.reason.tv.

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Contact

Chris Mitchell, Director of Communications, Reason Foundation, (310) 367-6109

Global Warming and Property Rights - A Reason Roundtable

chris.mitchell@reason.org (Chris Mitchell) — Wed, 11 Jun 2008 07:16:08 EDT

Should companies or countries that have contributed to global warming be required to compensate individuals directly impacted by climate change? Is global warming a threat to private property? The latest Reason Roundtable examines these questions from a couple of perspectives. Reason Foundation's Shikha Dalmia says libertarians "cannot treat the earth's thermostat as an enemy of freedom. Indeed, regardless of whether climate change eventually turns out to be real or not, the libertarian goal ought to be to ensure the protection and advancement of freedom - and all its attendant institutions: free markets, limited government and property rights. Jonathan Adler, professor of law at Case Western Reserve University School of Law, writes, "The whole point of protecting property rights is to ensure that property owners control exercise of their own rights. If a property owner wishes to accept another's waste in return for compensation, that should be her choice. If not, then her right to refuse ought to be protected. Individual property rights should not be put up for a community vote or sacrificed as part of some utilitarian calculus. Libertarians readily accept this principle when government planners violate property rights in the name of economic development (think of the Supreme Court's landmark eminent domain decision, Kelo v. New London). Yet they seem to abandon their commitment to property rights when it comes to global warming...Given the potential impact of climate change on property rights, we ought to at least start thinking about policy measures that compensate affected parties without themselves posing a risk to individual liberty." Indur M. Goklany, author of the book The Improving State of the World: Why We're Living Longer, Healthier, More Comfortable Lives on a Cleaner Planet, writes, "Not only is there no proven harm that can be specifically attributed to the warming, but, more importantly, even if there were such harm, a proper respect for property rights might preclude compensation...If only some countries had contributed to global warming and benefited from causing it while others had neither contributed nor benefited from it, there might have been an argument for compensation from one to the other. But that's far from the case. That every country is both a contributor and a beneficiary not only makes it infinitely more difficult to calculate who owes whom how much, it also vitiates anyone's moral standing for compensation - a normative commitment to property rights notwithstanding." Comment on the Reason Roundtable here. Reason Roundtable: Climate Change and Property Rights Previous Reason Roundtables Reason magazine's Climate Change Archive

What Exactly Is One Planet Living?

skaidra@reason.org (Skaidra Smith-Heisters) — Tue, 10 Jun 2008 00:00:00 EDT

One Planet Living Communities, a program of BioRegional Development Group, is a radical sustainability initiative promoting development that fits what proponents consider a socially equitable ecological footprint. As defined, a "one planet" ecological footprint is a consumption pattern in which individuals use, directly or indirectly, no more than their proportionate share of the natural resources that the world can sustainably produce. In North America, using proponents' assumptions and calculations, that means scaling back overall resource use by 80 percent on average. In the BioRegional framework, it also means achieving zero waste and zero carbon dioxide emissions from building operations, among other metrics.

To BioRegional, "one planet" living is not just a lofty ideal, but a fully-operational design principle. Based in London, the company currently coordinates with a handful of One Planet Living Communities including Masdar City, the "world's largest eco-city," under construction 11 miles outside of Abu Dhabi, in the United Arab Emirates. BioRegional's flagship North American project is Sonoma Mountain Village, a private, for-profit development by Codding Enterprises in Rohnert Park, California.

Codding Enterprises is best known for building some of the first suburban shopping malls in northern California. Local historian Gaye LeBaron has reportedly likened company founder Hugh Codding's sweeping influence on the area to the 1906 earthquake. (The natural disaster nearly leveled Santa Rosa at the same time that it devastated San Francisco, 50 miles further south.) At first glance, it seems incongruous that building the first "one planet" development in North America has fallen to Codding Enterprises. In reality, the company is doing what it has always done: building and selling the suburban "American dream." Only, at least in the heartland of progressive northern California where there is already a Prius on every block, the market in suburban ideals is changing.

Rohnert Park (pop. 41,000) is also a storied setting for Sonoma Mountain Village. The city was incorporated in 1962 and modeled after the master-planned and mass-produced postwar "Levittowns," the archetypal American suburb. One feature of its masterminding is Rohnert Park's maddeningly circuitous, alphabetically clustered street network. An unwary visitor trying to get across town can easily find themselves at any number of cul-de-sacs dead-ending at neighborhood parks. (Dana Court, Diane Court, Darlene Court and Donna Court near Dorotea Park, to take a random example). There are no cul-de-sacs in the plans for Sonoma Mountain Village. This next-generation master plan utilizes the SmartCode design template, intended to promote forms similar to the organic patterns of development of traditional villages and cities-in essence a reversal of the patterns of development rigidly enforced by conventional zoning laws.

Eventually, 1,900 homes and 500,000 square feet of commercial space will be built at the 200-acre site. The project already boasts of a $7.5-million, 1.14-megawatt solar panel array, biodiesel-powered construction, and an on-site zero-waste steel frame factory. (Project planners find steel framing ideal because it dramatically reduces construction time as compared to wood-frame construction, and because, unlike most wood posts and beams, the steel beams can be recycled into new buildings at a later date.)

The scale of Sonoma Mountain Village and Masdar City make them more than just your average utopian or alternative-living experiments. Those who are not motivated by, for example, social equity for its own sake, may view these projects simply as more green businesses in the booming sustainability industry, albeit ones that are pushing the edge of what is technically and legally possible.

There is plenty of room for disagreement on the merits of the assumptions embedded in the environmental and social ideals that appear to be driving these developments. And life in these communities is clearly not for everybody. But even skeptics and critics of the initiative may find it interesting to see how these developments fare, and wonder if the challenge of their implementation will reveal anything about the environmental and social questions that lie underneath the carefully-calibrated design metrics of "one planet" living.

Reason Foundation's Skaidra Smith-Heisters recently interviewed Kirstie Moore, Sustainability Project Manager for Sonoma Mountain Village, to get details on what the project entails.

Skaidra Smith-Heisters: Social equity is a fundamental of the One Planet Living initiative, the ecological footprint framework and (along with environment and economy) one of the so-called "Three Es" of sustainability. How does the design of Sonoma Mountain Village accommodate social equity?

Kirstie Moore: Sonoma County has relatively high housing costs compared with wages. And combined with the high percentage of single-family homes in the existing housing stock, there is a shortage of affordable housing. We will build more affordable housing than required by law and without deed restrictions to promote upward economic mobility. We intend to make it easy and affordable for our residents to live and work within Sonoma Mountain Village. Our goal is to create over 4,400 jobs from Sonoma Mountain Village, which will more than replace the 2,500 lost when Agilent, the former owner of the [high tech manufacturing] campus, vacated Rohnert Park. The mixed use plan of the community allows for jobs and people to be within a close proximity to each other, which also reduces the amount of carbon produced from VMTs (vehicle miles traveled). Codding has also invested in a Business Incubator which currently leases approximately 30,000 square feet of office space at Sonoma Mountain Village; the Incubator is available to new business specializing in sustainable resources and socially-relevant technologies. [According to Moore, a "socially-relevant technology" is technology that solves a social problem-Ed.]

Smith-Heisters: So, over the next 50 years as population grows-not only in Sonoma County, but in the world as a whole-you'll be recalculating how this community fits in?

Moore: We'll be constantly recalculating and looking at the data that is available to make sure that we keep within the "one planet" footprint. We have our 2020 goals, and various goals along the path, but it is a moving target. We can only base our calculations and our project development on the information that we currently have. We do have to be flexible, that's kind of the beauty of having BioRegional One Planet Communities overseeing us. It entails continual monitoring.

Smith-Heisters: How does social equity as a design principle at Sonoma Mountain Village sync with bioregional ideas and local environmental considerations? (For example, the differences in natural amenities between northern California and sub-Saharan Africa?)

Moore: BioRegional looks for appropriate ways to create social equity within the context of the specific region. For example, in the Masdar City project in the UAE they paid particular attention to labor practices. In Sonoma County, due to local and state laws, that is not a challenge we face.

Smith-Heisters: What regulatory impediments has the project faced? How do the technological challenges of the development compare to the challenges of "legalizing sustainable development"?

Moore: If you clear a path for technology it is usually created pretty quickly in today's world. The challenges that we face "legalizing sustainable development" are usually policy-related, which takes a lot longer.

PUC Rule 18 states that it is illegal to cross property lines with privately-metered energy. If PUC Rule 18 gets changed at some point, then we would be able to take central solar systems and supply individual residences with power. If we manage to overcome that at some point, we would actually be able to make it more affordable for people to buy these homes with all this technology on it-it is about a 30-35 percent cost difference.

Water is a huge story in Sonoma County. The fact that it is currently illegal to flush a toilet with anything but drinking water is almost funny, especially when you look at the plight of the rest of the world and the kind of water the rest of the world is drinking. It is really very sad. If that rule can be changed- [State Assemblyman] Jared Huffman has been extremely successful in getting that rule changed in multi-family units, condos and prisons, in everything but single-family-then our homes will be able to reduce water use by probably over 85 percent. Currently, without those kinds of technologies available, we can reduce water use within the individual home by 55-60 percent, which is still pretty good.

Smith-Heisters: Do you have a sense of why there is resistance to changing the PUC requirements?

Moore: I don't actually think there's resistance, frankly. PUC Rule 18 was put in to encourage people to reduce energy use. It was put in there for a reason that made sense at the time, it is just outdated and we need to start the process of changing it. One developer can't do it alone, but a lot of people actually do recognize that it is an issue. It is just a matter of getting it done.

Street widths are another issue for us. With SmartCode, we want to have narrower streets. We don't want our streets to be set up for drag racing. The City of Rohnert Park is absolutely on board with narrowing the street widths. Most cities are. It is actually the [Office of the] State Fire Marshal that is the roadblock there with concerns about fire truck access. Again, there are sensible reasons why it should be a certain way. However, there are options. Cities (such as Chico) in California have gotten narrower street widths. In Sacramento, a couple of weeks ago, I presented at an Attorney General and local government commission workshop, where a supervisor from Sacramento was talking about the Elverta Specific Plan. They have incentives within that plan to say if a developer will commit to exceeding [California energy efficiency regulatory requirements] by 25 percent, one of the things they'll be granted is narrower street widths.

If the [neighborhood] electric vehicle speed limit could go up to 35 miles per hour instead of 25 miles per hour, it might encourage people to use electric vehicles. [Neighborhood electric vehicles are light-weight one- to four-person battery-powered vehicles intended for short trips, restricted by law from going over 25 miles per hour and driving on any roadway with a speed limit in excess of 35 miles per hour-Ed.] Trying to encourage people to get out of the car is probably one of the hardest things. Vehicle miles traveled and the effect VMT have on the environment is absolutely huge in relation to land use. Planning your development around something like the SmartCode, and providing residents with options like links to rail, bus routes, really good car sharing, positioning the community so that everybody is within maybe a 10-minute walk to a school and then setting up systems like "walking buses" to actually get children to school (where you've got children walking in twos, with adults on either end). You can provide them with safe access to school without 25 parents individually dropping their kids off in the car.

Smith-Heisters: What is the timeframe that you're using for this particular development-how far out are you looking? How long do you think this community will be functioning in the way you've imagined it?

Moore: We are looking for this to be a community that will go on and on and on. As new technologies or different practices come online in 20-, 50-, 100-years' time, maybe things will change. The houses that are built from steel frame can be truly recycled into different structures that the technology of the future will be able to support. The community will be governed by an HOA [Home Owners' Association], which for the foreseeable future would need to be part of this. I would hate to see that it exists over time exactly as it does at build-out, because with the way the world is moving and the knowledge that the world is gaining, things will need to change. Hopefully we will set a framework where that will happen, and the "one planet" footprint will go on for as long as people are living here.

Smith-Heisters: What will the HOA require of people that live and work in this community, and what does that allow you to do in terms of design that you wouldn't be able to do in a more conventional development?

Moore: HOAs are pretty common. With Sonoma Mountain Village, it is imperative that you have some form of HOA. Codding will be part of the HOA until it is large enough to be taken over by the homeowners. With so many common areas on the site-wetlands, a riparian corridor, a retention pond area with natural habitat, community gardens, the town square, underground water storage of around 4 million gallons-all of that infrastructure eventually needs to be adopted by the city, water agency, county, community, and/or HOA. That's all factored into how we set up the HOA. Eventually, say PUC Rule 18 does get changed. Then, the HOA would most likely be responsible for managing the solar array that provides power to the single-family homes. Maybe they would manage certain greywater systems. In a typical HOA, or what CC&R [covenants, conditions and restrictions] would govern, you see things like: you can't paint your house pink, can't leave a car parked outside for more than X amount of time, can't rent a bed and breakfast room for more than two weeks, things like that.

We don't want to restrict people from becoming more environmentally conscious. My background is with traditional, very large, mass-producing homebuilders. In the CC&Rs and HOA rules and requirements I'm used to looking at, you would never be allowed to put a solar array on the roof, because "it would be ugly!" You wouldn't be allowed to grow vegetables in your front yard because it would "take away from the street presence." You couldn't have a water collection tank on the side of your home. There are still parameters-we don't want Sonoma Mountain Village to become wild and crazy, we want it to be appealing, to have people be able to live here in luxury and have all of the amenities you would normally have, and still have an infrastructure set up that is within a "one planet" footprint. The HOA and the CC&Rs will give process for people to manage disputes, how the common land is maintained, govern the wetlands. When the project is built out we envision that there is going to be more wildlife and natural habitat here than there is now-it is pretty barren after Agilent-bee gardens, butterfly gardens, green roofs to encourage the ground-feeding birds to go where the cats can't get them. We're really trying to think outside of the box, but all of those scenarios are going to have to be managed eventually. If a roof garden is private, that's one thing. But if it is part of the community, that would have to be managed by the HOA. Unfortunately, not everybody has the same idea about how things should be used, so you have to have some kind regulation about what those parameters are.

Smith-Heisters: But will you be able to paint your house pink?

Moore: It depends on the shade-probably not, I'm thinking. But that's no different than any other community out there. There is always going to be that kind of tug-of-war.