BHI to the Natural Resources Defense Council: Re-learn Economics 101

Beacon Hill Institute at Suffolk University Response to Laurie Johnson of the Natural Resources Defense Council. The response was written by BHI Executive Director David G. Tuerck. 

Available in PDF format at www.beaconhilll.org

March 13, 2015

Laurie Johnson, an economist at the Natural Resources Defense Council, recently posted a blog entry that sharply criticizes recent BHI studies of the EPA’s Clean Power Plan.  It is important, in reading this blog, to understand that Dr. Johnson’s job is to defend tooth-and-nail an organization whose purpose is to promote what it deems to be environmental protection at any cost to economic activity at home and abroad.
  
Now let’s see what Dr. Johnson has to say and how she is willing to mislead her readers and resort to her own brand of junk economics in order to defend her employer’s agenda. 

Johnson:  First and foremost, it [the BHI study] is not an analysis of the Clean Power Plan (CPP). The CPP sets limits on a very specific industry, the electricity system. BHI applies a back-of-the-envelope calculation to an economy-wide carbon tax analysis done by the Department of Energy's Energy Information Administration (EIA). As such, the electricity grid and the changes that would result to it in response to clean energy incentives and energy efficiency savings in the CPP are entirely absent from the analysis. 

BHI:  In order to analyze the effects of the CPP, it is necessary to determine the cost of achieving the reduction in carbon emissions aimed for the EPA. Because the EIA analyzes a scenario in which carbon emissions are reduced by about the amount intended by the EPA, its analysis provides a useful benchmark for the cost of achieving the intended reductions in emissions. This cost, put by the EIA at $10 per tonne of carbon eliminated, helps get us to an estimate of the cost of the EPA rules on the economy. 

Johnson:: While EPA's analysis does show electricity price increases, it also shows electricity bill decreases, because we will be wasting less energy. Further, because the amount of labor associated with clean energy investments is many times higher than the amount associated with fossil generation, you actually get net job increases from the type of investment changes the CPP will promote, not the phantom losses BHI projects.

BHI: The idea here is that consumers should thank the EPA for raising the price of electricity since the higher price will induce them to conserve on electricity and thus reduce their bills.  This would be much like thanking the oil companies for raising the price of gasoline since the higher price will induce drivers to use more public transportation.

Dr. Johnson’s excuse-making squares nicely with the NRDC’s environmental-purity-at-any-cost philosophy.  One gets the impression, in reviewing the NRDC’s lobbying efforts, that it would have us throw out our TV sets, ride bicycles to work and eat only vegetables organically grown in our home gardens.  We wonder if NRDC flaks should also consider turning off their computers.

As for the argument that “clean energy” utilities are all to the good because they require more labor to construct than fossil-fuel plants, we have to wonder if Dr. Johnson slept through her courses in cost-benefit analysis on the way to her PhD.  One of the canons of cost-benefit analysis is that labor belongs on the cost side of the ledger when comparing costs and benefits.  If we did not classify labor as a cost, someone could use cost-benefit analysis to argue against using machines to move dirt on the premise that we create more jobs by letting men equipped with shovels do the job.    

In our studies, we do, in fact, cite job losses as a collateral damage related to higher electricity prices.  But those job losses are the result of losses in production that are brought about by higher electricity prices.  Jobs are part of the cost of producing something, but when we produce less of something workers get laid off.             
                  
Johnson: Using EIA's carbon tax analysis, BHI then does a theoretically bizarre back of the envelope calculation:   First, it multiplies EIA's projected electricity price increase by electricity consumption (by sector) to get the total electricity cost increase consumers would supposedly pay under its non-CPP CPP analysis. It then uses an (incorrect) estimate of the climate and health benefits of each ton of pollution reduced (the so called "social cost of carbon," or SCC), and subtracts that from its estimated increase in electricity expenditures to estimate a final change in electricity price.  That makes absolutely no sense. The correct way to do this sort of analysis (assuming you were actually modeling the CPP) is to analyze the price effects of a policy on the economy separately from the environmental and health benefits of the policy. Environmental and health benefits are not electricity prices, and should never be fed into a model as if they were.

BHI:  We don’t need a lecture on cost-benefit analysis from someone who considers make-work jobs a benefit in modeling climate change legislation.   So we will try to give Dr. Johnson a refresher course on the task of estimating the effects of green energy policies on the economy.  

Let’s compare two methods by which the government can get utilities to substitute green for conventional power:  mandates and subsidies.  What the EPA has done is issue a mandate, the effect of which is to compel utilities to substitute more expensive power for coal-fired power.   That’s why the mandate raises electricity prices – indeed, causes them to “skyrocket,” per President Obama’s promise.

Subsidies work differently.  When the government subsidizes wind and solar power, there is an initial fall in electricity prices as the subsidized power is dumped into the grid.  Ultimately, price will rise as demand rises, but the initial impact is the opposite of the impact of a mandate.  

The subsidies aren’t free.  They require the public to pay the taxes out of which they are funded.  But the reduction in electricity prices partly offsets the burden of these taxes.  In effect, the reduced electric rates serve as a way to compensate the taxpayer for making it possible for society to reap the (supposed) benefits from reduced emissions. 

The problem with modeling a mandate is that we can identify the cost it imposes by estimating the rise in electricity prices.  But then how do we account for the social benefits touted by the likes of Dr. Johnson?  The answer is to do what we did:  Calculate the effect on price as the effect net of those benefits.  
We find it ironic that we were faulted in this critique for having thus downplayed the effect of the EPA rules on electric rates.  Perhaps Dr. Johnson isn’t comfortable with the fact that the rules inflict net harm on the economy even after we make a generous allowance for the environmental benefits they confer. 

It seems that she might have been more satisfied if we had reported higher levels of economic harm than we did, in fact, report. 

Or maybe the answer lies in the position taken by the NRDC that individuals and firms burdened by the anti-carbon mandates advocated by the NRDC do not deserve compensation.  The argument that they do is defensible under the “Takings” clause of the Constitution – an interpretation the NRDC staunchly opposes.  It seems that Dr. Johnson is loath to ascribe any benefit to the reduction in carbon emissions out of fear that someone will then want to find out about the costs. 

Johnson: Even though the aforementioned calculation is nonsensical, we should note that it does not use the main estimate used by analysts for climate and health benefits from reducing carbon pollution, of approximately $40/ton (btw, this value itself is likely to be significantly underestimated). Instead it uses $10/ton. Worse, it calls this $10/ton a market-based benefit measure. It is not clear where it gets this price, but one thing we know for sure: there is no "market price" for carbon pollution (i.e. what people are willing to pay in the market to reduce a ton of carbon pollution). That's the whole point!!! We have an environmental mess on our hands that we are trying to fix precisely because polluters are not charged for the pollution costs they impose on others (economists call this an "externality").

BHI:  The $10 SCC represents the tax on carbon that would induce a reduction in CO2 emissions to levels sought by the EPA in issuing the CCP mandates, as modeled by the EIA. The imposition of this tax would raise the market price of emitting carbon from zero dollars to $10.  Now think of the alleged climate benefits as social costs that are avoided by reducing carbon emissions.  If a tax of this magnitude would bring about the reduction in CO2 emissions sought by the EPA and if that reduction were “socially optimal,” then the tax would raise the price of electricity by the social cost that is avoided as a result of the last unit of electricity that is withdrawn from the grid under the tax. 

The fact that this $10 benefit (avoided cost) is minuscule in comparison to the private costs of the increased electric rates suggests that all the benefits combined are far lower than the $10 that we were willing to allow.  

The reality is that neither the EPA nor Dr. Johnson has a clue as to the magnitude of the avoided social costs.  Many economists argue that the social cost of carbon should be assumed to be zero due to the uncertainty as to the level of warming that is induced by CO2 emissions, and the level of harm that said warming would produce.  There is significant leakage of CO2 emissions into the United States from other countries that do not impose reductions in CO2 emissions.  In recent years, firms in energy intensive industries, such as Dow Chemical and BASF, have located production in the United States to take advantage of the lower energy costs due to the surge in domestic fossil fuel production.  Higher electricity costs due to the CCP would send electricity intensive companies and their emissions, such as manufacturing, looking to relocate aboard.  This would reduce any benefit from the reducing carbon emissions in the United States.  Economists call this term leakage or unintended consequences.          
      
We nevertheless ascribe some social value to the EPA rules in line with the hypothetical tax assumed in the EIA modeling.  We do not “feed” the supposed benefits of those rules into the model as prices. Rather we feed them into the model as partial offsets to the price increases brought about by the EPA rules in reflection of the EIA modeling on which our analysis is based.                    

Johnson: Which takes me to my penultimate point: BHI's net "cost" calculation (quotes because the CPP actually has a high net benefit, not cost) is dramatically inflated because it removes "co-benefits" from reducing carbon pollution emissions. These are all the lives saved, heart attacks avoided, asthma attacks avoided (and many more benefits) due to reductions in other pollutants on top of the carbon pollution reduction--that also happen to decline when you reduce carbon pollution. Fossil-backed industry analyses try to argue over and over again that because these "co-pollutants" are regulated under other statutes of the Clean Air Act, somehow they don't count. That defies common sense, and I doubt anyone whose paycheck doesn't rely on making assumptions like this buys it. It's like saying that if you start an exercise regime to lose weight, but also get the myriad of other health benefits associated with exercise, these "co-benefits" don't count. Does that make sense? Of course not.

BHI:  If my goal is to lose 20 pounds and if I can lose that 20 pounds by taking diet pills, then I can’t justify joining a gym because, by doing so, I can lose the same 20 pounds.   It is no answer to say that I might as well join the gym and lose 40 pounds.  The Centers for Disease Control recommend that healthy individuals get at least 150 minutes of moderate exercise per week.(1)  Dr. Johnson would have us believe that another 150 minutes of exercise would provide the same health benefits as the first 150 minutes. 

As we explain in our reports, particulate matter is currently regulated under the National Ambient Air Quality Standards (NAAQS). The NAAQS sets standards “based on such criteria and allowing an adequate margin of safety, are requisite to protect the public health.”(2) These standards are reviewed every five years to confirm that they are up to date with the most recent scientific research available.(3)  Any reduction in particulate matter that might be attributed to the EPA rules is either (1) already provided for by the NAAQS or (2) greater than that provided for by the NAAQS and therefore unnecessary.
    
Johnson: Finally, BHI applies a "coal intensity" multiplier to calculate its estimated state-specific electricity price increases. For example, the average percentage of electricity generated from coal in the U.S. is 40%; if a state's electricity is 80% coal generated, BHI assumes the electricity price increase in that state is twice its national average estimate. That's like saying if the average percentage of smokers across the US is 10% of the population, and 20% of a population in a given state smokes, then the price of cigarettes will be double in that state. Not to mention: electricity is imported/exported across state lines, so even if this silly calculation made sense, it pays no attention to the actual market structure of electricity generation and consumption.

BHI:  We used this calculation to distribute the U.S. net costs to the states, before calculating the change in electricity prices.  Intentionally or not, Dr. Johnson confuses price differences with cost differences. 

Again, to use the author’s analogy let us suppose that Congress raised the tax on cigarettes but not cigars or other tobacco products.  If we wanted to allocate the harm to smokers to the individual states, we would need to distribute the tax to industries based on their tobacco sales and then adjust for the portion of those sales that is accounted for by cigarettes.  So, we would adjust the total tobacco sales in each state by the ratio to cigarette sales to total tobacco sales in that state.  

Now, to return to the task of distributing the cost of the EPA rules across states, Suppose Massachusetts produced 10% of total U.S. electricity and used coal to produce 50% of its electricity, compared to 40% for the United States as a whole.  We multiply the total the net costs of switching from coal to more costly fuels for the United States by 10% and the result by 50% divided by 40% to compute the cost to Massachusetts.  We then used this cost figure to calculate the effect or energy prices.  
       
Johnson: I don't even need to go into the already discredited STAMP model BHI plugged its silly price estimates into, or the fact that BHI has been denounced by its own host university for politically-driven research plans that did not follow the university's rules or match its mission.

BHI:  The apparent basis of this criticism is that we draw on the precepts of Economics 101 in reaching our conclusions.   To wit:  “Supply equals demand.” Or “If a government policy causes the cost of producing something to rise, its price will rise, too.”  This orthodoxy is especially troubling for green advocates who aim to deindustrialize the country in the name of fuzzy climate change objectives.  You can find our defense of the STAMP model from a critique by the liberal Institute for Economic Policy and Taxation (ITEP) at http://www.beaconhill.org/STAMP-Method/ResponsetoITEPbybullet2014-0531.pdf

Additional point: 

One final smear was Dr. Johnson’s reference to a grant proposal that we once wrote (but was never funded), in which we suggested that if state renewable energy rules lead to higher electricity rates, the state might want to consider repealing them.  By seeking to convince the grantor that our work might have policy relevance, we allegedly “sought to manipulate economic research by producing reports that came to conclusions before performing any research.”   In the fevered imagination of the NDRC and other groups, even a hint that research that might produce policy changes adverse to their ideological agenda is proof positive of a sell-out to carbon interests.
     
Our work, however, puts the lie to this claim.  Recently, we reported that rules mandating green power could well end up reducing electric rates in three states – Rhode Island, Illinois and Maryland.   This is not because we sold out to environmentalists in those states but because our methodology yields different results for different states, depending on what the data show.   

It is odd to be attacked by a group that has used junk economics to further policy goals at the public’s expense.  Among its credits, the NRDC succeeded in stopping a measure that would have brought water to drought-stricken Central Valley of California.  The NRDC doesn’t like video games so it issued a report in which it greatly exaggerated the amount of power consumed by people who play them.  It has been behind an EPA rule that would double mileage standards at the cost of safety. 

Finally, our host university did not denounce our work.  It complained that we didn’t follow certain procedures.  We have asked the university to reconsider its complaint on the argument that we did, in fact, follow its procedures. 

Johnson: Enough said.

BHI: Indeed!

Notes:

1 Centers for Disease Control and Prevention, “How much physical activity do adults need?", http://www.cdc.gov/physicalactivity/everyone/guidelines/adults.html 
2 U.S. Code § 7409 - National primary and secondary ambient air quality standards. http://www.law.cornell.edu/uscode/text/42/7409
3 U.S. EPA, “Process of Reviewing the National Ambient Air Quality Standards, http://www.epa.gov/ttn/naaqs/review.html.

BHI’s response to TP’s Climate Progress blogger Michael Conathan’s critique of NJ wind farm study

-- This post was written by Paul Bachman, Director of Research, Beacon Hill Institute, August 19, 2011.


On TP's Climate Progress blog, Michael Conathan, claims that Beacon Hill Institute's recent cost-benefit analyses of offshore wind energy in New Jersey are slanted. Conathan alleges that the BHI study "misses the mark on both sides of the ledger by dramatically overstating the costs and underestimating the economic benefits of offshore wind."

It is actually Mr. Conathan that "misses the mark" in his critique of the BHI study. Mr. Conathan makes baseless claims, reports only partial data and relies on irrelevant studies with no economic value or relevance to offshore wind power in New Jersey. We address his individual critiques below.

Mr. Conathan: "The study dramatically underestimates the economic savings realized from the environmental benefits by assuming a static price for the valuation of reduction of greenhouse gasses - which will inevitably rise over time. "

BHI response: Mr. Conathan bases his claim on speculative assumptions about the future regulations of greenhouse gas emissions and other variables. He assumes that the U.S. government will impose a cap-and-trade system, a carbon tax, or a restrictive E.P.A. regulatory regime. This action by the federal government would raise the cost of greenhouse emissions and in turn the price of coal and other fossil fuels, while at the same time raising the benefits of wind power. However, these greenhouse gas regulations are not even a remote possibility in the current political and economic environment.

Let us take a look at the recent history of CO2 prices over time. The IntercontinentalExchange INC. which runs the Chicago Climate Exchange and Chicago Climate Futures Exchange has decided to shut both down due to a lack of legislative interest. "The U.S. has not enacted carbon cap-and-trade legislation and changes to the EPA acid rain program have reduced trading activity," ICE said in its notice. "Accordingly, volumes are down substantially and the exchange is operating at a loss." It appears that IntercontinentalExchange INC. does not share Mr. Conathan's view that the price of greenhouse gas emissions will inevitably rise over time.

The exchange also lists prices for New Jersey RGGI futures contracts. On June 30, 2011 the price was $2.02 per metric ton for November 2016 delivery and on May 30, 2011 the price was $1.93 per metric ton. In our study we used a real price of $2.04 in 2011 dollars. Therefore, our price is well within the range of futures prices listed at that time. Moreover, if we inflate our current price using a 3.5% annual rate, our $2.04 2001 real price translates into a nominal price of $2.78 in 2020 and $3.92 in 2030. We, in fact, do account for his inevitable price increase over time.

Mr. Conathan: By BHI applies an absurdly high discount rate of 10 percent to the benefits when most economic studies use rates of 3-5 percent. The discount rate mistake alone could lead to underestimating the benefits of offshore wind by as much as 50 percent.

BHI Response: First, Mr. Conathan makes the mistake of comparing our 10 percent nominal discount rate with 3-5 percent real, or inflation-adjusted, discount rates. Using the same 3.5 percent inflation rate assumption as in the previous example would translate our nominal rate into a real discount rate 6.5 percent, not far off from his 3-5 percent range. If we use the recent annual CPI increase of 4.2%, our real discount rate becomes would be 5.8%. Moreover, the White house Office of Management and Budget recommend using this discount rate.

While Mr. Conathan rails against us for applying such as high discount rate to the benefits, he is silent about the fact that we apply the same discount rate to the costs of the project. Thus, if we are underestimating the benefits of the project by 50 percent, which we do not, then we would be underestimating the costs also.

Mr. Conathan: BHI also artificially inflates the costs of the project compared to fossil fuel generation by failing to account for the reality that as costs go up, people will reduce their consumption thereby partially offsetting the price increase.

BHI Response: Mr. Conathan is describing what is commonly known as a "rebound effect." It is often used to describe the consumers' behavior after the installation of energy efficiency equipment. For example, as consumers witness their winter heating bill drop after making energy efficiency changes, they respond by turning up the thermostat to a more comfortable temperature, and thus negate some of gains of the efficiency gains. However, Mr. Conathan thinks that there is a free lunch to reducing electricity consumption and fails to recognize the two factors in the wind power case. First, consumers incur a cost to reduce the amount of electricity they would have consumed in the absence of the higher price. Either consumers lose the benefit they derive from that electricity consumed, for example less time on one's IPad, or consumers make an energy efficiency investments to reduce their electricity consumption, which also has a cost of lost opportunity to spend the money elsewhere. Thus, our estimates of the price effects include these costs of the rebound effect and do not need to be adjusted.

Mr. Conathan: "Furthermore, the study estimates the cost of natural gas and coal based on historical prices rather than based on forecasts of future market conditions. While natural gas prices are difficult to predict, experts believe coal prices will rise in the future."

BHI Response: Here again Mr. Conathan believes that his and other "expert" assumption of future prices and regulatory regimes are more valid than ours. Only time will tell who is more accurate. However, what we do know is that forecasting future regulations, supply, demand, costs, prices and other variables is extremely difficult and uncertain, and that includes coal prices. This is why we conduct a sensitivity analysis to test the robustness of our assumptions and provide a range of estimates.

Mr. Conathan: "The BHI study entirely fails to account for the jobs that would be created by the wind farm. Meanwhile, according to a 2009 report by the European Wind Energy Association, the wind energy sector in Europe created more than 60,000 jobs from 2004-2008."

BHI Response: Mr. Conathan is wrong again. We report net jobs, which includes 2,400 jobs created in the construction, manufacturing and related industries. These jobs created are simply swamped by the jobs lost in the other sectors that suffer from the higher electricity costs.

Mr. Conathan cites a report from the European Wind Energy Association, hardy an unbiased source. The purpose of the report is to boast the positive employment effects of the industry. However, as an economic study, it makes nonsensical assertions and fails to look at the economy-wide effects of wind energy that is more expensive and less reliable than conventional energy. Manufacturing and other energy intensive industries facing higher costs can move production to lower cost locations or simply shut down.

For example, the study states that the "additional employment effect of including the higher cost (and higher employment per MW installed) of offshore capacity is estimated at 2,800 jobs…" The report associates higher costs and higher employment requirements with offshore wind with economic benefits. The report associates higher costs and less efficient energy sources with more employment in the wind energy industry. Using this logic, the wind power should not be placed just off the New Jersey coast, but rather in the middle of the ocean because it would create many more jobs to construct and maintain the turbines and transmission lines that are much further away from the energy consumer. This is the same logic that would insist that a canal should be dug with picks and shovels instead of machines.

The report, and Mr. Conathan, fail to note that Denmark has the highest concentration of wind power in Europe and the highest electricity rates in Europe. Moreover, Denmark sells its wind power to Germany during the overnight hours at a very low rate, when the wind is blowing most consistently, and buys conventional electricity back from Germany during the daytime at a much higher rate, when their electricity demand is highest.

Mr. Conathan: Furthermore, the study assigns zero value to increased energy independence and vastly underestimates the reductions in greenhouse gas emissions that New Jersey's targeted 1,100 MW of offshore wind energy would produce.

BHI Response: Mr. Conathan displays his ignorance of the composition of the New Jersey electricity market. As we explain in the report New Jersey gets the vast majority of its electricity supply from domestic sources of coal, natural gas and nuclear power. Oil only provides between 0.5 percent and 1.5 percent of state electricity, and fluctuates depending on oil prices. Moreover, because it is unpredictable and unreliable, wind power cannot provide any of the marginal electricity supply. In other words, wind power operators are at the mercy of the current wind conditions and they cannot control their output to meet changes in electricity demand at any given moment in the day. Therefore, wind power must supply the base load on the grid, which means it would displace domestically supplied coal and natural gas and would have no effect on electricity supplied by oil. Therefore, no foreign oil would be displaced by the wind power.

Contrary to Mr. Conathan's statement that we underestimate the reductions in greenhouse gas emissions the wind power project would produce; the emissions effect is likely negligible for two reasons. First, coal represents 68% of the New Jersey's marginal supply of electricity, so that when the wind suddenly stops blowing at any given moment, coal plants must be cycled up to supply the power lost from the wind plant. The opposite happens when the wind begins to blow again.

Nevertheless, the coal plants cannot be shut down completely when the wind power is operating. That is to say coal power plants are similar to an automobile idling. They are still burning coal and sending some electricity to the grid, but not at an efficient level. When the wind stops blowing the cola plant operator hits the gas petal, if you will, to keep the current electricity supply balanced with the current demand and prevent brownouts and blackouts. While the coal plants are idling, so to speak, they are running at less-than-peak efficiency and produce more greenhouse gas emissions than if they were running at peak efficiency while online. This shifting back and forth between idling coal plant and intermittent wind turbine reduces the emission benefit from wind power.

In addition, the construction of a 1,000 MW wind plant takes much more raw materials, such as steel concrete, aluminum, plastics, transmission wires and land, or in this case water, than a conventional power plant. The production of all these materials also produces greenhouse gas emissions and when we accounted for these greenhouse gas emissions, the wind advantage erodes even further.

Mr. Conathan: This report isn't BHI's first foray into the admittedly complex world of offshore wind. A 2003 report from BHI on Cape Wind's proposal to build America's first offshore wind farm used similarly deceptive tactics, suggesting the project could cost the region $64 million to $134 million in tourism dollars. These findings were included despite polls that showed less than 3 percent of potential tourists would change their plans if the farm were built and despite ample studies of actual tourists' behavior in areas proximate to actual wind farms in Europe.

BHI Response: Mr. Conathan must not have read BHI's report on Cape Wind carefully. BHI did, in fact, conduct a statistical survey of tourists that were on the very Cape Cod beaches where the Cape Wind turbines would be visible. The fieldwork for these two surveys was done under contract with, and under the supervision of, David Paleologos, President, DAPA Research, Inc., an experienced pollster and professor at Suffolk University. The attitudes of European tourists on European beaches, cited by Mr. Conathan, are irrelevant to the Cape Wind project.

Mr. Conathan also fails to cite the recent contract between Cape Wind and the utility National Grid that priced its electricity at 19.4 cents per kilowatt hour in 2016, escalating 3.5% per year for 20 years. This is almost double the current electricity rates for Massachusetts.

Offshore wind power is more expensive, unpredictable, less reliable and less efficient than conventional energy sources. These features make wind power costly to electricity consumers, especially businesses in energy intensive industries. This is why wind power was abandoned as a source of reliable electricity at the dawn of the industrial revolution. These inconvenient economic truths force advocates like Mr. Conathan to resort to "deceptive tactics," half- truths and baseless accusations.

Re: Hands off my beer

The Alcohol and Beverage Control Commission (ABCC) has reconsidered its requirement that local brewers use locally-grown ingredients. While this is a welcomed step, the episode raises an interesting (read: disappointing) question about how policy is made in Commonwealth.

The ABCC stated that it:

endeavors to support and enhance the agricultural community, ensure the long-term viability of agriculture, and support farms that protect the common good in many ways including maintaining open spaces in communities.

These are honorable goals; supporting a local industry is always nice, and who would not like more open space? But at what cost? This issue is not presented, or so it seems, even considered.

-How much forest land will have to be converted to farm land to grow all these ingredients?
-Is this the most efficient use of this land?
-Would participating in trade with other states allow state farmers to produce a more valuable crop?
-What are the costs to other industries? ie forestry, craft brewing or other types of farmers.
-What is the revenue effect?

There is not an indication that any of these costs were considered. When only the benefits are considered, and touted, incomplete, and often incorrect, policies are proposed.

We encourage that any policy proposal have a thorough and complete Cost Benefit Analysis preformed. I find it troubling that red tape of this sort is implemented without considering the costs.

Impending chaos the result of EPA new power on GHG?

It's not just business that wants to slow down the Environmental Protection Agency and its new rules to regulate greenhouse gases under the Clean Air Act. States want the EPA to take another look.

A growing number of state regulators are urging the Obama administration to slow the rollout of proposed federal rules curbing industrial greenhouse-gas emissions, saying the administration's approach could overwhelm them with paperwork, delay construction projects and undercut their own efforts to fight climate change.

The concerns echo some criticisms that business groups -- including the American Petroleum Institute and the National Association of Manufacturers -- have voiced about the potential consequence of new regulations, though the states generally don't challenge the legality of the proposed regulations, as some business groups have. Indeed, many state regulators continue to say they support the Environmental Protection Agency's effort to regulate greenhouse gases. Their concerns, they say, have more to do with how quickly such rules should be phased in, and how to pay for an expansion in regulatory oversight at a time when their budgets are in the red.

Regulators from around the U.S., including Kansas, Pennsylvania, Florida and California, are calling on the EPA to go slowly with its new rules, and in some cases warning that they lack funding to regulate some of the new emissions sources that would be covered.

The states' warnings vary in urgency, with some saying the EPA's proposal can be easily tweaked and others urging the agency to reconsider the proposal, predicting dire consequences. South Carolina regulators, in a letter to EPA dated Dec. 23, said the proposal will cause chaos and warned that many construction projects -- and jobs -- are at risk.

Read: BHI's Comments on Regulating Greenhouse Gas Emissions under the Clean Air Act;
Advanced Notice of Proposed Rulemaking RIN 2060-AP12

New financial industry rules are self-defeating

In a recent letter to the Boston Herald, BHI Koch Summer Fellow Andrew Dabrowski thinks more rules don't make for better rules.

The Herald’s criticism of the new financial regulation package simply fails to go far enough (“Regulation history,” June 21). Suffice to say, there are many, many new rules, and very few of them will do anything substantial.

Does anyone really believe that the same tired government agencies will be able to manage ever more responsibility? Far from helping the American consumer, these new regulations will further restrict banking activity. Putting the brakes on the financial industry should be the last thing the economy needs. Obama’s regulation will fail to modernize the financial regulatory system, leaving it open to future disaster.

Ideally, the new rules should have centralized regulation by eliminating the legions of individual regulators. I don’t necessarily argue for a single agency, but rather for fewer, more effective institutions.

Tech Community to Obama: Repeal Sarbox!

In many respects, PC Magazine's John Dvorak speaks for Silicon Valley, which is fed up with the unintended consequences of Sarbanes-Oxley.

Sarbanes-Oxley makes it nearly impossible for an American start-up to make a public offering and survive it. Designed to curb the excesses and crookedness that lurked behind the Enron scam, MCI, and other financial catastrophes that took place in the early part of the decade, this law contributed to the out-and-out financial meltdown we are now witnessing. And how did it benefit anyone?

What Sarbanes-Oxley has done is add an outrageous reporting burden, which costs an estimated 4 percent of revenue to implement. All American corporations are immediately put at a disadvantage to the tune of 4 percent off the top. And what's the point of these new requirements? Simply to get accounting firms off the hook for cooked books or criminal activity. It has nothing to do with protecting the public, just protecting the accounting firms.

Venture capitalist Tim Draper once told me that a company has to make $300 million a year to be able to afford the overhead required to comply with Sarbanes-Oxley. Less than that and public corporations just bleed to death.

No matter what you think of Sarbanes-Oxley, one thing is very noticeable: Since the law's inception, the number of little Silicon Valley start-ups that went public is close to nil. This is the worst IPO market in years, and it's stifling the country. IPOs have been a traditional form of wealth creation and corporate protection unlike anything else. And you've seen what has happened without them. It's no coincidence that the economy is tanking. Sure, you can blame the housing bubble. But I blame the whole financial collapse on Sarbanes-Oxley and a moribund Silicon Valley.

If any savvy business people can manage it, they need to get Obama to lead the way in repealing this stifling and corrupt law immediately. It's done us no good whatsoever and promises to continue to slow progress. The country will be perpetually in a recession unless we realize what's at the root of the problem.

In today's pro-intervention environment, peeling away the major showpiece legislation of last meltdown might be wishful thinking.