HB 519: Testimony for the Energy and Natural Resources Committee

Ric Werme's RGGI Watch
-Repealing the Regional Greenhouse Gas Initiative

HB 519: Testimony for the
Energy and Natural Resources Committee
- by Eric Werme

Introduction

I support HB 519 for several reasons:

The science behind the Greenhouse Effect was questionable when RGGI was created in 2008 and weather over the last decade show a leveling and decline in global temperatures. The decline may continue in the years (and possibly decades) ahead. Yes, CO₂ is a greenhouse gas. However, measurements are showing CO₂ has a smaller effect than models expect.

Economically, people are finding that each new green job costs displaces more than one existing job. The few that directly benefit from RGGI do not offset the many who pay those benefits.

The ultimate goal is to shutdown RGGI altogether so that no ratepayers in the region are forced to pay into the system and that employers are not faced with the uncertain cost of RGGI in their operations.

In the short term, RGGI is neither costing New Hampshire much nor providing New Hampshire with much. This means the present is a very good time to leave RGGI.

In the global arena, China adds about 500 million metric tons of CO₂ to their annual emissions each year. RGGI's primary goal is "Ten Northeastern and Mid-Atlantic states have capped and will reduce CO₂ emissions from the power sector 10 percent by 2018." This is about 1.4 million metric tons per year - what RGGI is trying to do each year, China undoes in a day.
http://www.worldclimatereport.com/index.php/2011/04/14/biggest-drop-in-us-greenhouse-gas-emissions/
http://www.rggi.org/home

"Demon" CO₂ is a second rate demon

It all seemed so simple, so logical. Sunlight comes to Earth in visible, short wavelength light impeded mainly by clouds and heats land and water. Those surfaces radiate long wavelength infrared light that is partially blocked by CO₂. More CO₂ means more heat retention, and the planet warms. More warmth means more water evaporates and water vapor is also a greenhouse gas, so even more heat is retained and the planet warms further due to this positive feedback.

Laboratory experiments confirms infrared light is absorbed and the absorbtion spectrum is well described by theory and calculations. However, computer models project greater temperature increases than we observe. I suspect one culprit is that blocked infrared light leads to warmer surface temperatures, but that heats the air, causing increased convection and the excess heat is radiated away higher in the atmosphere. Another effect may be that tropical thunderstorms set the Earth's temperature. Clouds build up during the day thanks to convection. Increased convection lifts water vapor high in the sky where it condenses to form thunderstorms. Thunderstorms have anvil shaped tops composed of ice crystals. The cloud tops spread horizontally and create a large area that efficiently reflects sunlight. Reflected sun light doesn't heat the Earth, so it brings an early end to daytime heating.

More important perhaps than CO₂ and water vapor is an oceanic and atmospheric circulation called the Pacific Decadal Oscillation. Its 60 year period was in a warming phase from the late 1970s to the mid 2000s, a period that shows significant warming. The warm phase of the PDO brings more El Niños; the cool phase brings more La Niñas. The reports of 2010 being the warmest on record are thanks in part to last year's El Niño. So far this year, the Earth's temperature is dropping dramatically.

Other things that affect temperature include:

Land use changes
Forests are cool, airports and urban areas are hot.
Low solar activity
The current sunspot cycle is very weak, and the next one may be also.
Restatements in the historical temperature record
NASA's Goddard Institute for Space Science maintains one of the longterm global temperature records. For various reasons, they try to adjust past missing temperatures with long term averages. Other adjustments are made to compensate for station moves, the Urban Heat Island, etc. However, most of these adjustments have reduced the past temperature and the net effect is a warming bias that does not reflect reality.
We may still be recovering from the Little Ice Age.
One model by Syun-Ichi Akasofu of the University of Alaska mimics the thermometer record by combining a steady warming since the Little Ice Age and a 60 year periodic signal like the PDO.
Natural Components of Climate Change During the Last Few Hundred Years at http://people.iarc.uaf.edu/~sakasofu/natural_components_climate_change.php

Meanwhile, CO₂ concentrations across Earth are rising monotonically. If CO₂ and water vapor have the biggest impact on the global average temperature, then temperatures should also be climbing steadily, but they are not. The next couple of decades with a cool PDO will be very interesting and should allow us to better separate the effect of greenhouse gases from natural climate variations.

In the meantime, there are some forecasts for cool weather for the next couple of years. Long range forecaster Joe Bastardi expects brutal winters ahead from 2013 on.
http://notrickszone.com/2010/09/10/joe-bastardi-future-shock-brutal-winters-ahead-from-2013-on-now-into-a-major-la-nina/

RGGI was set up in the belief that CO₂ is the major driver behind global warming. That does not appear to be the case.

RGGI creates jobs but may also export jobs

There is more to creating a job than writing a new paycheck. You need things like:

Increasing demand for existing products or services.
Demand for locally made products is better than demand for services, as products require people to produce them in addition to the sales and support services. Increasing demand is usually good, though there are cases where increased demand is due to a decline in our standard of living.
Demand for new products or services.
New technologies may displace old technologies. For example, the demand for transportation services in horse and buggy days has been replaced by automotive services. The change ultimately increased our standard of living, but also left some people without jobs.
Increased productivity.
This is a bit of a two edged sword. On one hand, increased productivity means fewer employees are needed to do a job. On the other hand, increased productivity makes each employee more valuable and ultimately drives an increased standard of living. It makes businesses more competitive and that increases their business, and ultimately increases their employment.
The increased standard of living allows spending resources on improved living conditions, from one's personal space to national efforts to reduce air and water pollution. Throughout human development, improving people's standard of living has meant increased energy use. Increased energy efficiency leads to a higher standard of living and ultimately more energy use.

How well does RGGI compare against this? RGGI intends to achieve its goal by penalizing electricity use through a charge on CO₂ emission. The cost is currently low, thanks to generation not meeting the available CO₂ emission allowances. The number of allowances will decline in the future. Suppose demand for power produced by burning fossil fuel goes up faster than efficiency can be improved and alternative sources brought online. In that case, the public market for allowances should force their price up and the intent is that higher prices will force demand back down and encourage power producers to become more efficient.

Producers already have competitive pressure to burn fuel more efficiently, so buying CO₂ allowances will increase their costs and those will be passed onto their customers. Some alternative "green" energy sources of electricity are currently more expensive and it is not clear their cost will come down.

Sources like wind and solar are problematic because they cannot be used for baseload generation as are major sources like nuclear and coal are used.

Ultimately businesses that use electricity will pay more for it, and hence be less productive, less competitive, and less able to maintain their workforce. While RGGI tries to track their impact on regional businesses, it's very difficult to track that impact. It's harder measure expanding growth in non-RGGI states or moving manufacturing to China.

The RGGI states receive most of the cost of the CO₂ allowances, and this money is available for increased energy efficiency, job development, and balancing state budgets. The job development is generally within the alternative energy sector but is a small proportion of the stories touted by RGGI's success stories. Several other stories, such as insulation retrofits provide temporary work for contractors and manufacturers, but there are very few reports of creating long term jobs.

Contrast this with the NH Innovation Research Center, created in 1991 by the New Hampshire Legislature for the purpose of providing a mechanism to increase collaboration between New Hampshire businesses and university-based research to promote applied and basic scientific research, engineering, and associated marketing research and technology transfer to support the New Hampshire industrial and business community for the purpose of creating high quality jobs through technology development and innovation.

The NHIRC has at its disposal funds from the legislature which do not come from RGGI and are a fraction of what the state gets through RGGI. Nevertheless, their focus has likely created far more jobs by helping businesses improve their productivity and develop new technologies. For example. "PEI averted a planned shutdown of its operations in 1994. Sales have increased by more than 125%, and employment has increased from 90 to 127 people." Consider what this means - more jobs, more manufacturing, increased exports to other states and countries, but increased demand for energy.

The jobs that the NHIRC creates are an anathema to RGGI's goal of reducing CO₂ emissions. The NHIRC success makes it more difficult to achieve RGGI's goal. The jobs RGGI creates are aimed at reducing CO₂ emissions and don't have the long term impact that jobs and technologies supported by NHIRC.

Even the energy intensive manufacturing jobs to build wind turbines and solar panels are moving to China. RGGI was not designed to be a jobs program, it was not designed to increase the size of the state's economy. By increasing the cost of electricity, RGGI discourges growth.

"Green" jobs may take away conventional jobs

Other countries have provided incentives to create green jobs only to find they don't make their economies grow.

Spain provided attractive subsidies for alternative energy in wind and photovoltaics, triggering a boom in projects creating them. Unfortunately, Spain didn't limit the number of projects and the great number of them has exceeded the government's abilitity to pay the promised subsidies. Not only has the alternative energy bubble collapsed, the power Spain can subsidize ultimately gets paid by the consumers and some of their high energy use companies, e.g. iron and steel producers, have become uncompetitive in Spain and have shut down. A good analysis, Study of the effects on employment of public aid to renewable energy sources goes into great detail.
http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf

Other countries report similar problems. Canada considered implementing the Kyoto accord even if the United States and Mexico did not. The impact on their economy would have been suicidal, and they have backed away from that idea.

Inexpensive energy is an important component of an expanding economy. RGGI is making energy more expensive, and ultimately that is a drag on job creation.

The real goal

Several opponents to HB 519, including Governor Lynch, note that because NH imports electricity from the other RGGI states, we will still be paying for allowances but not be getting the benefits from them.

True enough, but this misses two things. First, withdrawing from RGGI is not the ultimate goal. We want to dismantle RGGI to end the allowances and auctions. While New Hampshire's energy production and consumption is too small to disrupt RGGI, the House's veto-proof approval of the repeal was loud and strong in New Jersey. Their legislature introduced bills in each branch last September. Our actions have gotten New Jersey's attention and will encourage them to press forward. Maine also has legislation that will get them out of RGGI.

If New Jersey withdraws from RGGI, that will have a big impact. New York is also talking about leaving RGGI, and I'm sure that talk has become more earnest. I don't know what other states are doing yet, but I created a new web page to track that activity, see http://wermenh.com/rggiwatch/index.html.

If RGGI is shut down, not only will it further reduce New Hampshire's energy costs, it will support economic growth throughout the region.

This is a good time to leave RGGI

Let's assume New Hampshire pulls out of RGGI now and is burdened with a year or two of RGGI payments that don't come back to us. This is the ideal time to withdraw from RGGI - the current CO₂ allowance price is as low as it can be. While other states catch up to New Hampshire's lead the cost to New Hampshire will be less than at any time in the future. Thanks to various efficiency improvements and the incomplete recovery from the recession, I suspect that producers may already have nearly enough allowances for 2011. The slow recovery may carry into 2012 and the cost to New Hampshire before the rest of RGGI is shutdown may be lower than anyone expects.

According to data recently released by the U.S. Energy Information Administration, greenhouse gas emissions dropped 7.1% in 2009 over 2008 when RGGI began. The result is primarily from three factors: an economy in recession, a particularly hard-hit energy-intensive industries sector, and a large drop in the price of natural gas that caused fuel switching away from coal to natural gas in the electric power sector. RGGI's last year of emissions data was 2008, so I can't check our region, but in just one year, the entire country achieved 2/3rds of RGGI's primary goal. If we've maintained that pace, we can declare success, end RGGI, and go home to a candlelight celebration.
http://www.eia.gov/environment/emissions/ghg_report/

Contact Ric Werme or return to his home page.

Written 2011 April 13, last edited 2011 April 20.