I recently ran an op-ed piece in Politico on the proposal to lift the oil export ban. You can find it at http://www.politico.com/agenda/story/2015/07/the-problem-with-elizabeth-warrens-oil-arguments-000141
The Cape Cod Times recently ran an op-ed of mine on climate change, which my readers can find at http://www.capecodtimes.com/article/20150530/OPINION/150539996. I think the piece is self-explanatory.
The paper subsequently printed two responses. The first, which you can find at http://www.capecodtimes.com/article/20150603/OPINION/150609968, is rather snarky and not very constructive. The second, full of errors but more thoughtful, is at http://www.capecodtimes.com/article/20150615/OPINION/150619782
I was a freshman in college at the time of the Great Northeast Blackout in November of 1965. Nearly 30 million people in New York, New Jersey, New England and Ontario lost power for up to 13 hours. The cause was simple human error. Transmission lines have safety relays set to disconnect the line if power exceeds the line’s capacity. One of the relays at a power station in Ontario had accidently been set too low, causing the line to cut out unnecessarily. The power from that line was diverted to other transmission lines, overloading them and causing a cascade of tripped relays.
A few days later, a friend told me a story about an 8 year old boy in New Jersey who was walking home from the playground hitting telephone poles with a stick along the way. One whack coincided with the blackout, convincing the young boy that he was responsible for the Manhattan skyline going dark. His frantic parents had to search for him for hours before finding him hiding in fear of the terrible punishment he knew he would have to face. Today that boy is probably a climate activist.
Irrational fears and magical worlds are, alas, not confined to small boys. At the time of the Great Blackout, John Fuller, a 52 year old writer for the Saturday Review, suggested that the blackout may have been caused by extraterrestrials. Hector Tobar joins this august group with his op-ed in the May 22 New York Times entitled “The Sins of Angelenos.” Mr. Tobar believes that the climate of Los Angeles has fundamentally changed because of human behavior – specifically his behavior. He notes that an arborist at the University of Oregon bemoans the loss of campus birch trees destroyed by rampaging bronze borer beetles thriving in our newly hot climate. Furthermore, in a heart-rending mea culpa, Mr. Tobar believes that “The plague of insects is my fault. So was the poor snow season in Oregon resorts, and Hurricane Sandy, and the rising tides threatening assorted Micronesian islands. As a native of Los Angeles, I am significantly more responsible for global warming than your average resident of planet Earth. We pioneered an energy-guzzling lifestyle for the masses and taught the world to follow our lead. Now a parched, endless summer is our punishment.”
While he’s being fitted for his hair shirt, Mr. Tobar might have a look at the facts. According to the National Oceanographic and Atmospheric Administration (NOAA), average temperatures in the US have increased by about 2° F since 1895. This warming, however, has occurred in two distinct periods. The first increase of about 1° F took place between 1895 and about 1935. Between 1935 and about 1970, average temperatures actually fell before starting to rise again. By around 2000, average temperature had risen by about 1° F compared to the level in the mid-1930s, and there it has stayed for the last 15 years.
Climate activists have been arguing for the last 20 plus years that carbon dioxide emissions will lead to temperature increases of 8-10° F with catastrophic results in terms of sea level increases, more severe weather, the spread of disease and general mayhem. To be clear, Mr. Tobar, the catastrophic predictions have not actually happened. Over the last 40 years, Los Angeles has experienced temperature increases similar to those of the early part of the 20th century, which did not seem to bring climate catastrophes. For the last 15 years, there has been no temperature increase at all. The temperature increase in Los Angeles over the last hundred or so years has been approximately the same as the temperature difference between LA and Santa Barbara 100 miles to the north.
The events Mr. Tobar notes, including the bronze borer beetles, the California drought, the poor snow in Oregon and Hurricane Sandy are all well within the natural variability of our climate. We need to remember that climate variations occur over hundreds, thousands and millions of years. None of us has a data base of personal experience sufficient to judge whether every individual event is somehow unnatural. Only proper, scientific analysis can determine that, and science is not showing us anything out of the normal range.
The consequences of this confused and magical thinking are potentially severe. The United States is a free society. Throughout our history, government has been seen as the servant of the people, not as their parent. Apparently, Mr. Tobar believes that “the masses” should not have been allowed to develop an “energy-guzzling lifestyle”. A modern industrial lifestyle derives from the substitution of massive amounts of chemical energy for human and animal power. Fossil fuels allow us to eat well, live well and to travel as we please. What does Mr. Tobar think we should have instead? Perhaps he has an idyllic vision of peasants living and dying within a few miles of where they were born? The Duke of Wellington, hero of Waterloo, disliked railroads, which he believed “only encourage the common people to move about needlessly.” Well, Your Lordship, the common people actually like moving about and don’t regard their mobility as needless.
I’ll grant Mr. Tobar this. If it turns out that increased carbon dioxide emissions actually do bring catastrophic temperature increases, he is welcome to say “I told you so!”. The American people, however, are highly doubtful that this will happen, and they have good reason for their skepticism. For now, however, let’s not pretend that the “parched, endless summer” is already here. Our climate is demonstrating normal variability, and the fervent wishes of climate activists can’t make it otherwise.
It’s been a while since I’ve addressed one of Tom Friedman’s crazy green columns, but this week he’s offering us a doozy entitled “Germany, the Green Superpower” in the New York Times’ May 6 issue. Mr. Friedman is absolutely giddy over Germany’s green energy program and suggests that they deserve a Nobel Peace Prize for a “world-saving achievement”. Really? Well, let’s have a look.
Mr. Friedman notes approvingly that Germany has increased the share of renewables in its electric power generation from nearly zero to 30% (actually 26.2% in 2014 according to German government statistics). True enough, but what does that really mean for Germany? Mr. Friedman admits that this accomplishment was very expensive, costing billions of Euros. He claims, however, that the purpose was to “drive down the cost of solar and wind to make them mainstream, affordable options”. Mission accomplished, since “With price drops of more than 80 percent for solar, and 55 percent for wind, zero-carbon energy is now competitive with fossil fuels here.” True, but very misleading.
According to the Energy Information Administration, at the end of 2014, electricity prices in the US were 12.2¢ per kilowatt-hour (kWh) for residential consumers and 6.65¢/kWh for industrial consumers. According to Eurostat, comparable year-end 2014 prices in Germany were 33.8¢/kWh for residential consumers and 22.6¢/kWh for industrial consumers. (Please note that these numbers reflect the recent strengthening of the dollar to 0.88 Euros. Otherwise, this comparison would have been much worse for Germany.) In other words, Germans pay nearly three times as much for electricity as Americans do. Is this really an accomplishment?
A Mercedes S-Class sedan starts at around $94,000, while a Ford Taurus sells for around $30,000. Alas, most Americans can’t buy the S-class, but according to Mr. Friedman’s logic, we could make the S-Class affordable by imposing an $80,000 per vehicle tax on the Taurus. The $94,000 S-Class would now be a bargain compared to the $110,000 Taurus. Would Americans really be better off? Seriously?
Mr. Friedman would have a better argument if he could claim that the German economy could thrive even with these high electricity prices, but it hasn’t. US GDP growth has averaged 2.7% per year over the 2013-2014 period, and Americans have been complaining (justifiably in my view) that we are experiencing the weakest economic recovery in modern history. The German economy grew at an annual rate of only 1.3% over the same period – half the US rate. Is this really the pathway for Germany to become a superpower?
OK, so the German public has taken a hard hit from its renewables policy, but isn’t it worth it to take the lead in fighting global climate change? Not so fast. The German emphasis on renewable energy must also be seen in the context of their other major energy policy – the phase out of nuclear power. According to German government statistics, in 2014, Germany generated 160.6 billion kWh of electricity from renewables and 97.1 billion kWh from nuclear plants. According to Chancellor Merkel, the nuclear component is to be shut down by 2022. The nuclear phase-out is expensive. Most of the plants shut-down so far are less than 40 years old, and the remaining capacity is 30-35 years old. The US has reactors that have been operating well for nearly 50 years. In essence, Germany must replace fully depreciated, low-cost power plants with something new and expensive. To accomplish this goal, Germany must grow renewable power by 6% per year through 2022 just to hold the zero-carbon component of its energy mix (nuclear plus renewables) flat.
Mr. Friedman is also ignoring Germany’s dirty secret – its increased coal use. German coal use declined for many years, mainly from closing high-cost domestic mines. According to BP’s annual statistical review for 2014, Germany coal consumption declined from 163.5 million tonnes of oil equivalent (Mtoe) in 1965 to a low of 71.7 Mtoe in 2009. Coal use then began to grow, reaching 81.3 Mtoe in 2013 and is still rising. Several new coal-fired power plants are under construction in Germany today. Why would a country so committed to fighting climate change increase its use of the highest carbon fuel? Economics. The Germans have started to feel a real pinch from the high cost of renewables and need to do something about it. Coal may also be the only economical way of incorporating large amounts of intermittent and unpredictable renewable power into a modern electricity grid requiring precise voltage and frequency control.
The Climate Community generally approves of high electricity prices, regardless of their impact on economic competitiveness. After all, they argue, we must engineer drastic cuts in greenhouse gas emissions to save the world, but just how “world-saving” is the German experience? Germany has indeed reduced its carbon dioxide emissions from 930 million metric tonnes (mt) in 1997 (the year Kyoto was signed) to 842 million mt in 2013, a decline of about 9.5%. Over this same period, Germany’s population has actually fallen from 82.1 million to 80.8 million. As a result, per capita carbon dioxide emissions have decreased from 11.3 mt in 1977 to 10.4 mt. Not bad, and much lower than US per capita carbon dioxide emissions at 18.6 mt, but is Germany the model for a low carbon world? Hardly. Current global carbon dioxide emissions are about 35 billion mt per year. With the world’s population now at about 7.125 billion, per capita emissions on a global scale are just under 5 mt. China’s per capita emissions are only 7 mt and India’s only 1.5. If every person in the world had the carbon footprint of the average German, global greenhouse gas emissions would double. To achieve a 50% reduction in carbon dioxide emissions by 2050, when the world’s population is estimated to be 10.5 billion (UN projection, medium estimate), per capita emissions for the world as a whole would have to be less than 1.7 mt. In other words, Germany would still have to reduce its per capita emissions by over 80%. Many in the Climate Community are demanding even more drastic reductions. In other words, if the Climate Community’s catastrophic scenarios are correct, rather than India aspiring to look like Germany, Germany must aspire to look like India. I doubt the average German would find this prospect appealing.
Perhaps the most extraordinary assertion in Mr. Friedman’s piece is that forcing modest amounts of expensive renewables into your economy coupled with denuclearization somehow makes you a world power. Germany is currently choking on the costs of these policies and facing a stagnant economy. How exactly does this enhance their ability to lead the EU into building a military capable of confronting Russia and China?
Military capability requires two things: lots of money and political will. Germany has neither. The average American household spends about $5,000 per year on the US military. The average German household spends about $1,600. How exactly would the German green energy program, which suppresses GDP growth and reduces the discretionary income of German households, support higher military costs? Moreover, how does a “green” Germany convince its EU partners, who are in even worse economic shape to join them?
Mr. Friedman has a really strange answer to this question. He predict that Germany will become the first “green, solar-powered superpower” because “They have to.” Mr. Friedman is right to worry about American disengagement in Europe in the face of increasing Russian and Chinese military power. If the US does not reverse course, the likely outcome is an uncomfortable European accommodation with China and Russia, not a revival of German military might.
Tufts University, where I teach, hosts the Global Development and Environment Institute (GDAE), a 1993 merger of Tufts’ Program for Sustainable Change and Development and the Fletcher School’s Center for Environmental and Resource Policy. GDAE (or gee-day as we call it) is staffed by intelligent and hard-working people who are great friends and colleagues. There is, however, something troubling about the principle that underlies the Institute. According to GDAE’s website “Throughout all of its activities, theoretical advances at GDAE are informed by the Institute’s applied and policy work, while its practical applications of economics are enhanced by a growing theoretical understanding of what is required to promote socially and environmentally just and sustainable development.” There is an inherent conflict of interest between research designed to understand and research designed to promote. One seeks the truth while the other seeks useful arguments in support of a political agenda. Climate science has fallen into this trap, and climate economics is right behind.
On Monday, March 23, GDAE celebrated the awarding of the 2015 Leontief Prize to Professors Duncan Foley and Lance Taylor of the New School for Social Research for their work on climate economics. The webcast of the award lectures by Profs. Foley and Taylor, as well as the slides and Q and A session can be found at http://ase.tufts.edu/gdae/about_us/leontief15.html. These talks were interesting since they highlight some of the main problems with the economic analysis offered by the Climate Community.
Professor Foley’s talk was entitled “Global Warming and the Pitfalls of Welfare
Economics”. His main argument is “It is very commonly assumed that climate change can be brought under control only by means of a sacrifice on the part of the present generation. … But actually, no sacrifice on the part of current generations is necessary.” The idea of costless decarbonization has enormous appeal to the Climate Community. But how exactly does Prof. Foley accomplish this miracle? His argument is as follows: “Because the emission of greenhouse gases that leads to climate change and climate damage is a ‘negative externality’ (in the language of welfare economics), the ‘business-as-usual’ path on which the world makes no effort to control climate change is inefficient.” In essence, Prof. Foley’s argument is that the damage from greenhouse gas emissions will be so bad that mitigating this damage must of necessity pay for itself, leaving us all better off.
There are two problems with this argument. First and foremost, Prof. Foley is assuming that the impacts of increased atmospheric carbon will be large and negative. Second, he is assuming that climate policy is a simple dichotomy – we either prevent climate change or we don’t. Suppose, by way of analogy, that your doctor tells you that you have a disease which will kill you in six months and proposes an experimental treatment (not covered by your insurance) that will cost $500,000. Poverty is better than death, so the treatment seems, by definition, cost-effective. This conclusion, however, depends entirely on whether the doctor’s diagnosis is correct and whether the experimental treatment will in fact cure you. If there is any uncertainty around either of these questions, the cost-benefit calculation is not so obvious.
To an audience of climate true believers, Prof. Foley’s assumptions are articles of faith and not to be questioned. In reality, however, both assumptions are highly debatable. As discussed often in this space, the science behind catastrophic climate change is weak. The externality of additional carbon may actually prove to be positive, bringing longer growing seasons, higher crop yields, fewer deaths from cold exposure and other benefits. Second, even if the externality proves to be large and negative, none of the mitigation measures currently being proposed by the Climate Community would bring any meaningful reduction in atmospheric carbon concentrations.
In fact, Prof. Foley is offering us no more than a truism: you can spend a lot of money if you can be sure that the expenditure will allow you to avoid certain disaster. If, on the other hand, the disaster is not so certain or if the proposed mitigation steps wouldn’t solve the problem, then his analysis fails. If we assume nuclear war, a strike by a massive meteor or an invasion by hostile extraterrestrials, any macroeconomic model will project severe economic losses. The model would give us no insight, however, into either the probability of these events occurring or the effectiveness of possible mitigation measures.
Let’s turn now to Prof. Taylor’s lecture entitled “Greenhouse Gas: Long‐Run Growth and Collapse”. Prof. Taylor’s argument is that greenhouse gas emissions will constrain long-term economic growth, leading to an economic collapse in 6-7 decades when atmospheric CO2 concentration reaches about 750 ppmv with a resulting temperature increase of 5-6° C. According to this argument, global economic output cannot increase past that point without a decrease in CO2 concentration. He notes that much of the economic growth in the industrial world over the past 200 years is the result of applying energy to labor. Since energy use emits CO2, then, without mitigation measures, productivity growth will eventually stop or else “CO2 accumulation will overwhelm the economy.” In the Q and A session, Prof. Taylor explains that his macroeconomic model contains a “damage function” which specifies the cost of climate change through increased storms, rising sea levels, etc. The assumptions built into the “damage function” fully determine the model results, and these assumptions accept climate catastrophe as a foregone conclusion. His analysis does not consider the possibility that rising CO2 levels might in fact have positive impacts or that the climate feedback loops which are required to generate a 5-6° C temperature increase may not exist. In other words, he has accepted uncritically the most severe scenarios offered by the Climate Community. As a result, his model produces a tautology: if CO2 limits growth, then CO2 will limit growth.
Beyond the fundamental issues of climate science, analysis of the cost and efficacy of mitigation measures is critical here. Prof. Foley suggests that mitigating the impacts of climate change would cost about 2% of GDP annually. Prof. Taylor is more specific, assuming that mitigation would require a carbon tax (or equivalent) of $44 per metric tonne (mt) of carbon dioxide. He uses this number since it represents the “mid-range of current estimates”, without considering whether any of these estimates has any validity.
The Climate Community talks very glibly about the low costs of mitigation, but let’s apply some simple logic tests. A gallon of gasoline emits 8.9 kilograms of CO2. Burning 112.4 gallons of gasoline thus generates one mt of CO2, and a $44/mt tax is equivalent to about $0.39 per gallon. To put this number in context, over the last 20 years, average US gasoline prices have varied from a low of $0.96/gallon in February of 1999 to a high of $4.11/gallon in July of 2008, a range of $3.15. Average prices have fallen by $0.94/gallon over just the last six months. In other words, the proposed carbon tax is a fraction of the normal market variation in gasoline prices. Why should we assume that such a tax will have a transformative effect on the US private transportation market?
Europe has had high fuel excise taxes for decades – averaging $2-2.50 per gallon above American levels. Europeans may drive smaller cars fewer miles, but they still rely on private vehicles for most of their travel, and they still drive cars powered by conventional internal combustion engines. European carbon emissions have declined slightly in recent years, but Europeans drivers are still major emitters of CO2. If high taxes have not transformed the European automotive industry, which is world-scale and technologically innovative, why should we expect a different result from much smaller taxes in the US, a society of far greater distances with an economy built on and held together by low cost transportation?
How about electricity? The marginal source of electricity in the US is new combined cycle natural gas-fired power plants. Using the Energy Information Administration’s data base and assuming 15% return on equity, 80% financing at 6% interest and a load factor of 85%, power generated from natural gas costs about 4½¢ per kilowatt-hour (kWh). Without subsidies, solar photovoltaic power, which is the darling of the Climate Community, costs about 16¢ per kWh. Prof. Taylor’s $44/mt carbon tax would increase the cost of gas-fired power by about 1½¢/kWh, less than 15% of the differential with solar. Other renewable energy sources show large gaps as well. On what basis should we assume transformative effects from such a tax?
Europe has spent heavily on renewable electricity with only modest impacts. Many EU countries are now reevaluating the costs and benefits of renewables as a way to reduce carbon emissions. Germany decided to accelerate the shutdown of its nuclear power industry after the Fukushima accidents of 2011, but the shortfall has been filled not by wind and solar, but by inexpensive but high-carbon imported coal.
Even though the impact on the structure of the US energy industry would likely be small, the macroeconomic impacts of a $44/mt carbon tax are potentially serious. The US currently emits roughly 6 billion mt of CO2 annually. The initial impact of Prof. Taylor’s tax (before any resulting change in consumer behavior) would be $264 billion annually. Since there are roughly 110 million households in the US, this tax would amount to about $2,400 per year per household. A tax of this magnitude would probably reduce US CO2 emissions primarily by economic contraction, rather than by efficiency improvements or switching to zero-carbon technologies. If the carbon externality turns out to be positive, rather than negative, such a tax would result in a dead loss to the economy.
Prof. Foley offers a solution to this problem, one that has been discussed often by the Climate Community. He proposes offsetting the carbon tax with a reduction in the income tax. This idea makes sense only to people who have never spent much time in Washington. Our elected officials enact taxes not to solve social, economic or environmental problems, but to increase the revenue available to distribute to favored constituencies. “Revenue neutrality” is a common theme on the campaign trail, but it is anathema to Washington politics.
One final point, which needs constant reiteration. Prof. Taylor states that a mitigation cost of 1.25% of GDP would be roughly twice the level of worldwide energy consumption subsidies. The subsidization of fossil fuels is a myth widely believed only because it is so often repeated. If current global GDP is about $60 trillion, then 1.25% would be $750 billion, implying that global energy subsidies are about $375 billion. In fact, net worldwide taxes on crude oil and petroleum products (taxes minus subsidies) are currently over $2 trillion per year. (For more information on this issue, see my posting of July 8, 2010, entitled “Taxing the Oil Industry”.
On balance, the lectures by Profs. Foley and Taylor offer little value added. All we really see from their modeling efforts is that disastrous assumptions produce disastrous outcomes. The issues of carbon impacts and mitigation are complex, and the assertions made by Profs. Foley and Taylor should have been challenged. As you can see from the Q and A session, they weren’t.
GDAE really should consider hosting forums where a range of viewpoints are offered, and the audience is forced to think hard about these problems. Too often on the climate issue we see a single view offered to an audience of the faithful, inclined to accept highly debatable points uncritically. Under these circumstances, accolades come too easily, and the extra work required to prepare scholarly work for defense against legitimate challenges by colleagues is simply not done. Instead of tight, rigorous argument, we get instead glib and unsupported assertions. That is the inevitable result of an effort to promote rather than to understand.
The Obama Administration’s negotiations with Iran have become one of the most controversial foreign policy issues in many years. Perhaps the core of this problem is how the President defines negotiations. For the sake of argument, let’s consider two different kinds of negotiation.
Type I involves two CEOs negotiating a merger of their companies. They agree on the technologies involved, the business models and the value of the merger. What they are negotiating is how the value of the merger will be split between the two companies, and perhaps what their individual roles will be in the new firm. They both recognize, however, that failure would be bad for both and have a strong incentive to come to an agreement. The negotiations may get heated, but generally take place in a cordial atmosphere with both sides accepting the good faith of the other. The agreement takes the form of a set of promises, which each side believes the other will keep. Both anticipate a long-term relationship where honesty and goodwill will remain valued.
Type II involves a police SWAT team negotiating with a bank robber holding hostages inside the bank. Although this situation is also a negotiation, it’s very different. This is not a cordial, “let’s have dinner together” type of negotiation. The police are trying to limit severely the bank robber’s options: either release the hostages and surrender or risk being killed. Agreement is reached only through action, not promises. No relationship here. No goodwill.
For most of the post-war period, the State Department has tended to see all negotiations with other countries as Type I. Assume that your negotiating partner is reasonable and that there is a solution that will meet the needs of both parties. Treat promises as substantive concessions. This approach is fine if we’re negotiating lumber trade with Canada, but not if we are negotiating with rogue states, the international equivalent of criminals.
Neville Chamberlain made this mistake in his negotiations with Hitler at Munich in 1938. He assumed that the horrors of the First World War would keep the Germans, as well as the British and French, from ever initiating a European war, and he expressed his willingness to address Germany’s “legitimate” territorial grievances. From today’s perspective, the Munich Agreement looks crazy. How could any intelligent person have been so badly deceived? The trap Chamberlain fell into was essentially to announce that he was willing to take whatever deal Hitler offered him as the only alternative to war. He ended up giving Hitler a substantive concession (forcing Czechoslovakia to cede the Sudetenland) in return for Hitler’s promise of no more territorial ambitions. Hitler took the concession and immediately broke his promise.
Chamberlain was convinced that he had tried his best to avert war, and that resulting disaster was therefore not his fault. He shouldn’t get off that easy. In 1938, the Czechs had a million well-armed, well-trained troops in fortified positions. The German military was much weaker than it would be in 1940, and the “West Wall” defenses against France and Britain had not yet been completed. A 1938 war would have been bloody, but it’s quite possible that Hitler would have either lost the war quickly or been ousted by his generals if the French and Germans had opted to fight at that point. Chamberlain’s negotiating strategy cost the world 50 million dead.
The Islamic republic of Iran is an autocratic, violent and messianic state, similar to Nazi Germany, but without the economic capabilities. It seems obvious that the acquisition of nuclear weapons and the associated delivery systems is the core of their geopolitical strategy. During the Bush Administration and the first term of the Obama Administration, the US followed a clear policy that Iran would not be permitted to acquire such weapons and that they would be subject to severe economic sanctions and ultimately military attack if they continued their nuclear weapons program. Despite its chronic weakness, corruption and anti-Semitism, even the United Nations supported that policy with resolutions demanding that Iran end its nuclear program. This policy defined success as the dismantling of Iran’s centrifuges and of the facilities capable of producing weapons-grade fissionable material.
The situation has now changed. President Obama has relaxed sanctions without any reciprocal concessions by the Iranians. It now appears that the President is promising to ease sanctions further and allow Iran to maintain its nuclear capability in return for a promise (perhaps even a temporary promise) not to build a bomb. Secretary Kerry and other members of the Administration claim that UN inspections will prevent Iran from breaking this promise or at least alert us if they have done so. They continue to make this argument in the face of the complete failure of the inspection regime under Saddam Hussein and the admission by the UN International Atomic Energy Agency last week that they lack the capability of determining even where all of Iran’s nuclear facilities are located. We have tried this approach for years with North Korea, giving them billions of dollars in aid and other concessions in return for dismantling their nuclear weapons program. We are now out the money, and North Korea has nuclear weapons.
In a Type II negotiation, the police would never agree to let the bank robber go free in return for promises not to rob banks in the future, not to use his gun and not to harm the hostages. The police wouldn’t care of the negotiation were “fair” or if the bank robber had legitimate uses for the money he had stolen. You throw down your weapons, let the hostages go and surrender or we shoot you. We hope you choose the sensible option, but we’ll go either way. This approach is the one we should use with Iran.
Using this approach does not require that we sit down across a table in Geneva with some nice coffee and snacks and then glad-hand each other in front of the press. It does not require that we treat the Iranian mullahs with respect that they do not deserve. President Truman negotiated with the Japanese in 1945 by making the Potsdam Declaration which demanded that Japan surrender its armed forces unconditionally or face “prompt and utter destruction.” After the dropping of atomic bombs on Hiroshima and Nagasaki, Japan agreed to these terms. The only substantive concession we made was allowing the Emperor to remain as a figurehead. The US did not treat the Japanese as an equal partner in these negotiations. Not very nice, but very clear and very effective. Truman understood how to negotiate.
The White House and its congressional allies often claim that their approach is the only alternative to war. This argument is silly. The question is whether the US is willing to play hardball with the Iranians. I offered a proposed approach in my posting of June 2, 2011. The essence of this idea is to withdraw US recognition of the Iranian mullahs and recognize instead a government-in-exile. The US would then announce that any cargoes of oil leaving the Kharg Island terminal would be seized by the US navy and sold on the open market with the proceeds held in escrow for the Iranian government-in-exile until such time as they gain power. The US Navy would not actually have to seize any cargoes, since no oil importer would purchase a cargo at the risk of losing it and no shipping company would send their vessels to Iranian ports. Iran could smuggle out small amounts of oil by truck or pipeline, but their ability to export substantial amounts of oil would be stopped completely. Note that this approach does not require the support of Russia, China and others whom we have been treating with kid gloves lest they leave the Iran sanctions coalition.
US policy would thus be to squeeze Iran’s economy to the point where a nuclear weapons program becomes prohibitively expensive. Reagan did this with the Soviets. Maybe the mullahs would get nuclear weapons anyway, but they would have them in the context of a weak economy. The nuclear weapons program is apparently quite popular among Iranians, but that might change if they were starved to support the program.
President Obama could never take this step, because he believes too deeply that the US should have no more power in the world than Denmark or any other country and that miscreants can only be brought to heel by threatening the disapproval of the world community. This view is potentially disastrous not only for the US but for the rest of the world. Like Chamberlain, President Obama’s failure here would cost us dearly in the future. Future generations are likely to ask how anyone could have been so naïve.
The White House blog of February 26 has a piece by Brian Deese, Senior Advisor to President Obama, entitled “7 out of 10 Doctors: Climate Change Is Already Harming Patients’ Health.” The piece claims that “Today, the American Thoracic Society (ATS) will hit the halls of Congress to educate our representatives about a new survey of more than 900 ATS members, which found the majority of doctors believe climate change is already negatively affecting the health of their patients. In fact, 77 percent of respondents reported that increases in air pollution due to climate change are worsening the severity of illnesses in their patients, and they expect these health impacts will further increase in the future. ATS members also indicated that their patients are experiencing other climate-related health problems — including injuries due to severe weather, allergic reactions, and heat-related impacts.”
This study is more red meat to the Climate Community, since it appears to bring yet more experts onto the side of the climate advocates. We should all be automatically skeptical of studies, however, since some are designed to elicit information from the surveyed group while others are structured to generate pre-ordained conclusions in support of a political agenda. The only way to tell which type of study the ATS has produced is to move beyond the executive summary and talking points and consider whether the survey adheres to rigorous methodologies. Let’s go through this step by step. I realize that this post is a bit long and tedious, but it’s really the only way to understand what we have here. (You can find the ATS study at http://www.atsjournals.org/doi/abs/10.1513/AnnalsATS.201410-460BC.)
Surveys are tricky, since the results can differ dramatically based on the sample size and composition and the way the questions are phrased. The ATS claims a membership in excess of 15,000 doctors, nurses, researchers and other health care professionals. The survey was sent to 5,420 members selected at random, of whom 915 or 17% responded. There are two issues here. The first is that the respondents account for only about 6% of the membership, which brings into question the White House claim regarding 7 out of 10 doctors. More precisely, 70% of 6% or about 4% of ATS members stated their agreement with the broad climate positions that the White House advocates.
Second, there is no way of knowing whether the sample suffers from selection bias. For example, were ATS members who are interested in climate change and supportive of the climate agenda more likely to respond? Were those who disagree with the climate agenda more likely to roll their eyes and throw the survey away without answering? There’s no way to know, but let’s assume for the sake of argument that the sample is fully representative of ATS members.
The survey starts with the question “How knowledgeable do you feel about the association between climate change and health impacts?” Seven percent of the respondents answered “Very knowledgeable”, another 31% “moderately knowledgeable” and 44% “modestly knowledgeable”. The authors suggest that the responding group is therefore authoritative since 82% of the respondents were at least “modestly knowledgeable”. It would be equally valid to say that less than 40% of the respondents were even moderately knowledgeable about climate change.
Moreover, there is a problem with self-identifying expertise. We all know people who believe they know everything, and other people who are very knowledgeable but personally modest about their abilities. Self-identification is not a very good way to determine what people actually know. It would have been better to ask the respondents a short series of questions about climate change to provide a more objective assessment. Questions such as (a) “According to the current consensus, how much have global temperatures increased in the past 150 years?”, (b) “How much have global temperatures increased in the last 15 years?” or (c) “Over the past 100 years, have the frequency and severity of hurricanes increased, decreased or remained roughly the same?”. By the way, the answers are (a) 1° C, (b) zero and (c) “remained roughly the same”.
Another interesting question here is how the respondents obtained their information. Doctors are all very busy people. How many who claimed they were knowledgeable about climate change have actually read any of the Intergovernmental Panel on Climate Change (IPCC) studies and evaluated the evidence for themselves? How many respondents, on the other hand, obtained their information from the New York Times or from TV news? In other words, do they have a detailed scientist’s knowledge of climate change issues or just a layman’s knowledge based on what they have read or heard in the news?
The first substantive question in the survey is “Do you think that climate change is happening?” As discussed often in this space, this is the wrong question to ask. The climate changes all the time. This problem is aggravated in this survey by the confusing definition offered to the respondents, which is “Climate change refers to the idea that the world’s average temperature has been increasing over the past 150 years, may be increasing more in the future, and that the world’s climate is changing as a result.” Eighty-eight percent of the respondents answered “yes”, but this statement is a tautology. Temperature is a major part of climate. If temperature rises, climate is changing by definition. This statement is as illogical as asking whether filling your bathtub would cause the water level to change.
I suspect that the study authors really meant to ask whether the temperature increase is causing changes in other climate parameters. If this is the case, they should have specified what changes they were referring to. Do they mean more frequent and severe hurricanes, more frequent and more severe droughts, more rainfall, more snow, less snow? We should also note that the actual history of these parameters, as opposed to the projection of future trends, can be determined by data, not just opinions. We have extensive data in the US on temperature, precipitation, droughts, wildfires, storms and diseases. Surveying opinion on these parameters is silly. You could, for example, ask people in Boston “How many world series championships have the Red Sox won in their history?” and you would get some insight into how knowledgeable people are about the Sox. The correct answer, however, would be eight, even if 90% of the survey respondents think the correct answer is 4.
The next survey question concerns the causes of climate change. Respondents were given six choices: (1) Caused entirely by human activities (7%), (2) caused mostly by human activities (61%), (3) caused about equally by human activities and natural changes in the environment (20%), (4) caused mostly by natural changes in the environment (8%), (5) caused entirely by changes in the natural environment (2%) and (6) none of the above because climate change isn’t happening (2%). The majority of respondents have answered in line with the “climate consensus” that more than half the observed temperature changes have been caused by human activity. Do the respondents’ answers suggest that these doctors have studied the evidence and reached a conclusion that somehow reinforces the science? Or perhaps the responses are just reflecting what the doctors have read in the newspapers or heard on TV. No way to know.
The survey then asks “How much, if at all, do you think climate change is affecting the health of your patients?” The answers are interesting. Only 10% of respondents answered “a great deal”, 34% said “a moderate amount”, 29% said “only a little” and 8% said “not at all”. The other 20% said that they didn’t know or that they didn’t see patients. This question is a prime example of a common problem in surveys – the double question.
The most notorious instance of this trick was a 1997 encounter between President Bill Clinton and Abigail Thernstrom, an outspoken opponent of racial preferences. President Clinton got in Prof. Thernstrom’s face and demanded, “Abigail, do you favor the United States Army abolishing the affirmative action program that produced Colin Powell–yes or no? Yes or no?” The question actually has two independent parts: (1) do you believe that Colin Powell’s success was a result of affirmative action by the military and (2) do you favor abolishing affirmative action in the military? By demanding a “yes or no” answer, President Clinton was trying to trap Prof. Thernstrom into saying either that she doesn’t think Colin Powell (a very popular figure at the time) should have become Chairman of the Joint Chiefs or that she doesn’t favor abolishing the affirmative action program. This is a clever debating trick, but logically fallacious. Prof. Thernstrom did not take the bait and replied that she does not “think that it is racial preferences that made Colin Powell.” In other words, she answered the double question with two answers: “no and yes”.
The ATS survey is also asking a series of double questions, although not in such a confrontational manner. The first question is whether the respondents are seeing any change in their patients’ health. The second question is whether they attribute these changes to climate. Double questions cannot be answered by “either yes or no”, since the respondent may have different answers to the two parts of the question. Let’s look at some specifics.
The first specific question is whether the respondent thinks his or her patients are currently being affected by climate change in terms of “Heat-related effects (e.g., heatstroke, heat exhaustion, cardio-respiratory illness)”. Forty-eight percent of respondents answered “yes”, but what exactly does “yes” mean? Is the respondent saying that he is seeing an increased incidence of heat-related effects, that he attributes heat-related effects to climate change or both?
According to the IPCC and other climate advocates, average global temperatures have increased by about 1° C (1.8° F) over the last 150 years. For the four hottest months of the year (June, July, August and September) the average high temperature in New York City is 80.25° F. The four-month average high in Philadelphia, about 100 miles away, is 83.25° F, a difference of 3° F. How many doctors would tell their patients that moving from New York to Philadelphia would subject them to a materially increased risk of heatstroke, heat exhaustion or cardio-respiratory illness?
This survey question as phrased is so vague and ambiguous that there is no way of knowing what the respondents had in mind. We can, however, gain a little insight by looking at the comments made by some of the responders on this topic. For example, “Frequency of chronic obstructive pulmonary disease and asthma exacerbations increased with high temperatures.” or “I had a patient with a severe chronic obstructive pulmonary disease exacerbation related to increased temperatures and several asthmatic patients who have had significant worsening of their disease in the heat, requiring increase in medications.” The thrust of these comments is that patients experience health problems when temperatures are unusually high, which is perfectly plausible, but has no bearing on temperature trends or their causation.
The next specific question asks whether the respondent thinks his or her patients are currently being affected by climate change in terms of “Vectorborne infection (e.g. Lyme, West Nile, Dengue Fever, Malaria)”. Forty percent of the respondents answered “yes” to this question. In addition to the double-question problem, the selection of diseases is odd. According to the Centers for Disease Control (CDC), malaria has been virtually eliminated in the US, except for cases where the patient contracted the disease overseas and then returned to the US. Dengue fever is a strictly tropical disease, and, according to the CDC, “Nearly all dengue cases reported in the 48 continental states were acquired elsewhere by travelers or immigrants.” Why would the study authors include these diseases in a question to American doctors? Is the implication that climate change is turning the US into a fever swamp?
Lyme disease has been increasing in the US, particularly in the Northeast, but there is significant controversy over the reason. Climate advocates like to point out that even a slight increase in temperature can cause an increase in the population of the ticks that carry the disease. Other researchers, however, note the increased populations of the deer that carry the ticks. Restrictions on hunting, changes in land use and human demographics have all contributed to the increase in the number of deer. Still other researchers attribute the increase in Lyme disease to changes the populations of other mammals, such as coyotes or red foxes, which either carry ticks or feed on animals that carry ticks. In any case, on what basis are the respondents concluding that the Lyme disease cases they see are a result of climate change? Is that even what they mean?
The last vector-borne disease in the question is West Nile virus, a mosquito-borne illness that has been increasing in the US. Evidence suggests that this disease was introduced into the US in 1999 by an infected individual returning from overseas. Once the virus is present, it can spread rapidly through birds, mosquitoes, people and other vectors. The effect of slightly increased average temperatures is simply unknown.
The issue here is whether the survey actually contains any information about the connection between increased temperature and the incidence of vector-borne diseases. It’s doubtful that many (if any) of the respondents have actually done rigorous studies of this relationship or are claiming specialized expertise. More likely, the survey is offering anecdotal evidence about the increase in such diseases coupled with the casual opinions of the doctors about the relationship to climate change.
Fifty-seven percent of the respondents thought their patients are currently being affected by climate change in terms of “Injuries due to severe storms, floods, droughts, fires.” This is an interesting result, since the data show that there has been no long-term increase in the incidence of any of these four events. The detailed comments by the respondents offer some insight. A number of the comments noted that wildfires affect patient health because of increased particulate matter in the air. On what basis, however, are the respondents attributing these fires to climate change? Wildfires have increased in recent years, but they are well below the level experienced in the 1930s. Are the respondents even offering an opinion here or are they accepting what they believe is a premise of the survey?
Several other comments noted the increased health problems associated with Hurricane Sandy. These observations are perfectly reasonable, but, again, on what basis do the respondents attribute Hurricane Sandy to climate change? There has been no increase in the frequency or severity of Atlantic hurricanes (See my post of November 13, 2012 on this topic). In fact, Sandy was a relatively weak hurricane that happened to hit a highly populated area, causing substantial damage and loss of life. I am not aware of a single climate model that predicted that increased atmospheric carbon concentrations would cause hurricanes to veer suddenly westward and strike the New York metropolitan area. The relationship between Sandy and climate change was part of the narrative presented by the Climate Community, politicians and the major media. The fact that the survey respondents are making this factual error suggests that they are simply repeating what they have heard in the media.
The same is true of the next question, whether patients are currently being affected by climate change in terms of “Air pollution related increases in severity of illness (e.g., asthma, COPD, pneumonia, cardiovascular disease)”. Seventy-seven percent of respondents answered “yes” to this question. Several of the respondents comment quite reasonably that air pollution, particularly particulate matter, causes health problems. There is, however, no connection between conventional air pollution and carbon emissions, which are totally benign at current concentration levels. A false narrative has been pushed by the Climate Community and its political and media allies by insisting on using the term “carbon pollution.” (See my post of June 14, 2014 regarding the despicable ad by the American Lung Association suggesting that carbon dioxide will poison your baby). The respondents here are reflecting a misconception probably derived from their reliance on the media for climate change information. The White House statement that “In fact, 77 percent of respondents reported that increases in air pollution due to climate change are worsening the severity of illnesses in their patients…” is simply false. Sorry, air pollution, whatever its health impacts, is not caused by climate change.
On balance, the study questions are clearly intended to document that climate change is already causing health effects but in fact the survey elicits no useful information. What we have here are scattered anecdotes about patient issues combined with a range of vague opinions about climate change and its impacts. Given the constant double questions in the survey and the often factually incorrect statements embedded in the survey questions, this study contributes nothing of any substance to the climate change debate.
Unfortunately, the poor quality of this work does not stop the authors from going to their inevitable destination – political advocacy. For example, respondents are asked to evaluate the statement “My primary place of work does an effective job minimizing its use of fossil-fuels (e.g., conserving energy/water, recycling equipment, etc.)” Seriously? Nowhere does the survey address the respondents’ views on the relationship between fossil fuels and climate change or on whether reducing fossil fuel use in hospitals or doctors’ offices would be cost-effective or have any meaningful impact on atmospheric carbon. Couldn’t the minimization of fossil fuel use, such as the elimination of diesel back-up generators or a reduction in the number of ambulances in use, actually harm patient outcomes? Would it be beneficial to replace fossil fuels with more expensive alternatives, thereby increasing health care costs?
The next statement for respondents to evaluate is “Teaching about climate change and its association with health impacts should be integrated into medical education.” Seventy-three percent of respondents either agree or strongly agree. OK, fine, but what exactly should be taught in medical schools? The standard climate narrative with all its flaws? The factually incorrect information that permeates this study?
Next comes “Physicians should have a significant advocacy role in relation to climate change and health.” Seventy-four percent either agreed or strongly agreed. What exactly are they supposed to advocate? The confused mess contained in the survey? How about asking doctors to advocate for good science instead?
I don’t fault the responders at all in this survey. They were asked vague and ambiguous questions that required combining their knowledge and their opinions on multiple topics. I suspect that doctors as a group hold opinions on climate change similar to the educated public as a whole, which reflect many of the misconceptions and deliberate distortions carefully fashioned by the Climate Community and happily spread by the media. The study authors, on the other hand, should know better. This study establishes the American Thoracic Society as yet another professional organization which has turned its back on professional standards, science and rigor and opted instead to become a political advocacy group. The result can only be a loss of professional standing and reputation over time, as people increasingly see the distortions and deceptions involved in pushing the climate agenda. The management of the ATS should (and eventually will) be embarrassed.
The New York Times had another troubling article on climate change last week by reporters Justin Gillis and John Schwartz entitled “Deeper Ties to Corporate Cash for Doubtful Climate Researcher”. The article raises concerns about the climate research conducted by Wei-Hock (Willie) Soon, a scientist at the Harvard-Smithsonian Center for Astrophysics. Dr. Soon has argued that solar energy, rather than anthropogenic carbon emissions, is primarily responsible for observed temperature variations in the Earth’s atmosphere. The Times reveals that some of Dr. Soon’s work was funded by grants from Southern Company, a major coal-burning electric power company, and by the Koch brothers. On the surface, the Times is asking a legitimate question about whether such funding is ethical and appropriate. The reporters, however, are not satisfied with a straightforward, factual piece. The paper just can’t pass up an opportunity to advance its overall climate agenda.
Here’s how the article starts, “For years, politicians wanting to block legislation on climate change have bolstered their arguments by pointing to the work of a handful of scientists who claim that greenhouse gases pose little risk to humanity.” The article falls afoul of two fundamental fallacies.
The first is that “climate deniers” are an organized group of political hacks, dishonest scientists and their fossil fuel company paymasters, working together and coordinating their activities to undermine legitimate climate science. In this sense, climate denial supposedly has a single organizational identity and any dent in its armor undermines the credibility of the whole enterprise. We assume, for example, that members of the White House staff develop a political strategy to meet their objectives, that they speak from a common script and that their public statements are carefully coordinated. When Josh Earnest or Susan Rice speaks publicly, we can be reasonably sure that their views and actions reflect President Obama’s wishes.
However, neither “climate deniers” nor the “fossil fuel industry” is an organization. There are, of course, various industry associations, such as the American Petroleum Institute, the American Gas Association and the National Mining Association which do represent companies in their various industries. The views of these companies on climate change, however, are all over the map. Shell and BP, two of the largest oil companies in the world, have been publicly supportive of both the catastrophic climate hypothesis and of strong government actions to reduce carbon emissions. The Times article cites Southern Company, a major coal-burning electric power company, as the funder of Dr. Soon’s work. This may well be so, but other power companies have very different views. Duke Energy, for example, a major electric utility in the Carolinas states that they are “committed to finding new ways to confront one of our industry’s biggest challenges – global climate change.”
The implication of the Times article is that undermining the credentials of one scientist somehow calls into question what the paper sees as a coordinated effort. The article includes a photo of Senator James Inhofe (R-OK), a long-time opponent of efforts to decarbonize the economy. The caption is “Senator James M. Inhofe, Republican of Oklahoma, praising scientists like Dr. Soon.” What does “like Dr. Soon” mean? Are the reporters claiming that all scientists who oppose the climate agenda must be unethical like Dr. Soon or that Senator Inhofe praises unethical scientists?
I have been studying climate change policy for nearly 20 years, and I was only vaguely aware of Dr. Soon. His arguments have never been a central part of the climate policy critique.
The second major fallacy is the Times usual mischaracterization of science. Climate change is a hypothesis: increasing atmospheric concentrations of carbon dioxide and other greenhouse gases will cause temperatures not only to rise but to accelerate with catastrophic results, including rising sea levels, loss of cropland, the spread of disease and others. This hypothesis can be evaluated only by testing it against empirical evidence. If atmospheric greenhouse gas concentrations increase by x, then y will happen. In other words, the ability to make predictions is the key to science. The Times, on the other hand, argues that scientific questions are determined by “consensus”. Therefore, the number of scientists supporting the hypothesis determines its validity. By implication, if you can undermine the credibility of an opponent, then the number of “real” scientists opposing the hypothesis is reduced.
Here’s an interesting analogy. Let’s assume that you are the captain of your high school debate team and that you have successfully competed your way to the state championships. The championship round will address the proposition “The Earth is flat”, and your team will be arguing the affirmative. Just prior to the debate, you discover that the captain of the opposing team does not in fact attend the school he is representing, but was brought in as a “ringer.” You bring this clear violation to the attention of the debate organizers who immediately disqualify your opponents, allowing you to bring home the trophy and enjoy your victory parade.
This is all well and good, but you need to bear in mind that the disqualification of your opponent has absolutely nothing to do with whether the Earth is flat. In my analogy, this doesn’t really matter because nothing of substance is at stake in the debate. Suppose, however, that a victory for the affirmative team in the debate would result in a tax surcharge of $10,000 per family to build a fence on the edge of the world to keep people from falling off. Now there are real stakes to the debate, and your success in disqualifying your opponents will have serious adverse consequences for the society.
This problem highlights why we use science and not “consensus” as a mechanism for resolving scientific questions. The “scientific community” is wrong on many issues at any given point in time. The problem is we don’t know which ones until we apply the scientific method – testing hypotheses against evidence. The Times just doesn’t seem able to grasp this distinction.
One of my favorite shows on television is “The Blacklist” on NBC. The premise of the show is that Raymond “Red” Reddington, a former spook turned good-hearted master criminal, helps the FBI track down the world’s worst criminals, those on the FBI’s Blacklist. Red, played by James Spader, is a wonderful mix of amiability, sophistication, compassion, menace and violence. His motives are always unclear, but combine a sense of criminal self-interest with social responsibility, a kind of modern-day Robin Hood. Most of the villains on the Blacklist are really, really bad, including cyberterrorists, organ thieves, mass murderers and assorted psychos. The most recent episode, which aired February 12, adds to the list of horrific criminals one of the Left’s favorite bad guys.
The plot of the episode is as follows. A CIA agent masquerading as a priest in Uzbekistan is captured by a shadowy terrorist group called the SRU, under the leadership of a man named Ruslan Denisov. But wait. It turns out that the terrorists are actually a local human rights/environmental group fighting against (you guessed it!) an American oil company. Twenty-five years previously, a corrupt Soviet-era Uzbek politician had enriched himself by giving a sweetheart deal to Anecca Oil Corporation to build an oil pipeline in Uzbekistan. Since its construction, the pipeline has been leaking toxic chemical like mad, killing hundreds of local citizens and causing massive outbreaks of cancer. Rather than fix the problem, Anecca, with the active connivance of the CIA, has used its massive corporate power to cover it up. No worries, Red makes sure that the Company’s criminal malfeasance comes to light. At the end of the program, Red explains that Denisov may be temporarily imprisoned by the Uzbek authorities for his actions, but he will ultimately emerge a hero for having chased the American company out of the country, to be replaced by (get this) a French oil company which will presumably operate the pipeline responsibly.
I’m sure this scenario seems perfectly plausible to a generation of Americans taught by their schools and by Hollywood that US corporations should be lumped together with terrorists in terms of the harm they do in the world. I understand that this show is fiction, but fiction often informs or reinforces people’s views of the world, so let’s consider whether this plot makes any sense. I have six separate criticisms.
First, pipelines are not particularly difficult to build and operate. Leaks do occur, but operators have extensive high-tech systems to locate and repair leaks very quickly. It’s no more in their interest to build faulty pipelines than it is for Boeing to build airplanes that crash. The episode’s premise is analogous to an engineering company that builds a bridge that periodically fails and dumps cars into the water. People know how to build bridges, and their operators take extensive care to maintain them. There are some leaky pipelines in the world, such as the Soviet-era pipelines moving natural gas from Siberia to Western Europe, but these are generally operated by corrupt and inefficient state companies, rather than private companies, which tend to take care of their assets.
Second, pipelines in and of themselves are not generally desirable investments for oil companies. Most integrated oil companies, like ExxonMobil or Shell, see pipelines as simply a way to move their oil and natural gas to market. It’s the oil production that makes the profit, not the delivery system.
Third, in this Blacklist episode, Denisov says, “Almost 25 years ago, my country sold an American company – Anecca Oil – the rights to build a pipeline from Tashkent to the Andijan Region. The price was absurd. The Uzbek people received a fraction of the value.” Oil and gas production often involves “producer surplus” also called “economic rent”, i.e., a revenue stream in excess of the cost required to provide a market return to investors. Virtually all oil and gas contracts are structured to give the investor an acceptable return with all the producer surplus going to the government. Pipelines almost never involve economic rent. It’s tough enough just to ensure sufficient revenue to keep the pipeline operating and provide a basic return to the owners. These are not big revenue streams for host governments, any more than a bridge or a road would be.
Fourth, in my forty years in the oil business, I have never seen a case where a government official gave an oil company a “sweetheart” deal in return for a bribe. Such an action would quickly become obvious, probably to the press and the public but at the very least to all the other corrupt officials in the government. The normal mechanism for stealing oil and gas revenue is to give the oil company a deal on commercial terms which can stand up to public scrutiny and then to steal or divert money out of the national treasury. Such theft is much easier to accomplish, particularly in autocratic countries, since such diversions of funds can more easily be hidden. Furthermore, this system allows other corrupt officials to get their share of the funds, so the oligarchs are all satisfied with the arrangement. It’s also worth noting that governments can easily change the contract if they conclude that the terms are unfavorable. Oil companies don’t like this, but there’s often little they can do. Forced “renegotiation” of contracts has occurred recently in Russia, Venezuela, Kazakhstan and even in the United States.
Fifth, one of the FBI agents says about the massive fatalities and illnesses caused by the pipeline leak, “No company can ignore this. It’s bad for business.” The other agent replies, “Only if someone can prove the truth. Anecca spends a fortune on lobbyists to make sure that doesn’t happen.” Seriously? Denisov can organize a violent band of Uzbek terrorists to try to force Anecca to clean up the mess, but they can’t pick up the phone and call the New York Times? Anyone who believes that lobbyists can keep the Times from reporting an anti-corporate story has never read the paper. How did BP do in hiding the Deepwater Horizon disaster from the press? How about Union Carbide and Bhopal?
Red himself sums up the story line when he says, “Somewhere 6,000 miles away, a group of bean-counters in a board room did a cost-benefit analysis and concluded that these people aren’t worth the cost of responsibly maintaining their pipeline.” Here you have, folks, the anti-corporate view in a nutshell: American corporations are run by people who would kill for a buck. There are, of course, corporate malefactors, but business people are highly representative of the society as a whole and no more inclined to practice unethical self-interest than other segments of society, like government, entertainment, sports, academics, the press or the clergy.
I have no insight into NBC’s motives in airing this episode, and it may be pure coincidence that this story line appears right when Congress has sent the Keystone Pipeline authorization to the President. You can decide for yourself.
I try to read all (or almost all) Thomas Friedman’s columns in the New York Times. I rarely agree with him, but every once in while, he writes a column that’s so bad that it just cries out for a reply. His September 6 column, entitled “Leading from Within” definitely falls into that category.
Mr. Friedman’s thesis in this piece is that the United States can combat ISIS and Vladimir Putin with two powerful actions: allow US oil to be exported and impose a carbon tax. He is way off base on both counts.
Let’s take oil exports. I agree with him fully that the US should allow the free export of crude oil and refined products. Doing so would eliminate some logistical bottlenecks inside the US and allow the US economy to reap the full benefit of the crude oil we produce. For decades now, many Americans have mistakenly believed that keeping oil in the US helps American consumers while sending oil oversees benefits foreigners. We saw this problem when the Alaska Pipeline opened in the mid-1970s. Alaskan crude was not a good quality fit with West Coaster refineries, and the sensible solution would have been to export Alaska oil to Japan and replace it with imported crude into the Gulf Coast. That proved politically impossible, and the companies were forced by law to bring the crude oil around to the Gulf Coast at significant additional cost. American consumers paid the difference.
This action was costly and unnecessary. American consumers care about the price of fuel and the potential for market disruption. There is a single global, integrated oil market with a unified price structure. Producers supply oil to the market, and consumers buy from the market. It doesn’t matter where your oil comes from. If Saudi Arabia collapses, the global price of oil will increase and all consumers will feel the impact, whether or not they happen to be purchasers of Saudi crude.
Mr. Friedman’s expectations from lifting the oil export ban are unrealistic. He quotes Andy Karsner, CEO of Manifest Energy, as saying “Let’s lift that export ban and have America shaping the market price in our own interest.” Producing additional oil is a great boon to the US economy, but we are hardly in a position to shape the world oil market. In 2013, the US produced about 10 million barrels of oil per day (MBD), up about 3.2 MBD since the low point of 6.8 MBD in 2007. That energy boom has created unexpected jobs, profits and tax revenue for the US. Over that same period of time, however, global oil demand has grown by about 4½ MBD from 82.4 to 86.8 MBD. US oil consumption has declined by about 1.8 MBD over that same period from 20.7 to 18.9 MBD, but we still have to import 8.9 MBD or 43% of our needs. Every barrel of oil exported from the US will have to be replaced by a barrel of imported oil. This trade may result in some sensible logistical cost savings, but they will be small when oil prices are around $100 per barrel.
The US has gone from producing 8½% of the world oil market to 11½%. That’s great, but it hardly puts us in a position to control world oil prices, particularly when the Middle East still produces one-third of the world’s oil supply. Mr. Friedman expects that lifting the export ban could reduce oil prices to $75-85 per barrel, resulting in a “draining of our enemies’ coffers”. A slight logistical shift in the destination of US oil supplies would have a negligible impact on world oil prices.
Mr. Friedman’s second proposal is a carbon tax that “puts a predictable premium on carbon, ensuring that we unite to consistently invest in clean energies that take us beyond fossil fuels, increase efficiency and address climate change.” Good luck with that. As discussed many times in this space, no politician in his right mind would impose a carbon tax high enough to induce a real change in the capital stock or in the way people use energy. So far, carbon taxes in Europe, the Northeast United States (The “Regional Greenhouse Gas Initiative”) and all the bills proposed in Congress would set carbon taxes sufficient to shift money from the private sector to the government but way below the level necessary to effect real change. Fossil fuels have no competitors in terms of cost or performance. Setting carbon taxes high enough to push fossil fuels out of the market would shut down the economy.
Mr. Friedman thinks he can compensate for the adverse economic impacts of carbon taxes by slashing income, payroll and corporate taxes. Seriously? Mr. Friedman is clinging to the naïve notion that our elected officials in Washington spend their time thinking about what’s best for the country. What they are in fact thinking about is how to extract the maximum amount of money from the electorate to allocate to favored constituents. Our Congress doesn’t do “revenue neutral”.
The problem with Mr. Friedman’s grandiose schemes is that they promise way more than they can deliver. If this is a weapon to be aimed at ISIS and Putin, it’s just another pea-shooter that will convince our adversaries that US politics is all about rhetoric and appearances and not about substance. This is exactly the wrong answer.
The idea that building a successful political/military coalition “starts with respect earned from others seeing us commit to doing great and difficult things at home that summon the energy of the whole country…” is ridiculous. Charles de Gaulle famously said, “France has no friends, only interests”. An understanding of that fact should be the core of our foreign policy.
Take Turkey, for example. The Turks sided with the Germans in World War I because they expected the Germans to win. They paid a heavy price for that mistake with the loss of their empire and sat out World War II as a neutral country. Today, Turkey is torn between the secular, modernist urban traditions of Mustapha Kamal and the more traditional Islamist view, which seems now in the ascendency. The current Islamist government of Turkey plays this game carefully as a major supporter of Hamas while remaining a member of NATO. None of this has anything to do with shared values or whether Turkey likes the US. They are simply picking winners. Remember that in 2003 the Turks refused to let coalition forces enter Iraq from the north which would have made our attack much easier.
How about Qatar? The US has made a major commitment to this small feudal sheikhdom by locating key military facilities there. While the Qataris are happy to have our protection and our money, they are also active financial supporters of the Muslim Brotherhood, Hamas and ISIS. Qatar host an office of the Taliban in Doha. The Qataris will always support the winners. If they are not sure who’s going to win, they’ll support everybody.
The Saudis have now agreed (maybe) to provide a base for training forces to fight ISIS. Wonderful. The US has treated Saudi Arabia as a friend for the last 70 years because they are the world’s key oil exporter. During this time, the Saudis have done nothing whatsoever to support US interests. The Saudi royal family has a deal with their Wahhabi extremists allowing the princes of the Saud family to keep most of the oil money and live in unimaginable luxury. In return, the Wahhabi clerics run Saudi Arabia with the brutal hand of Sharia law, making average people miserable. Everyone in the West, including myself, was shocked and disgusted by the video-taped beheadings of three westerners in recent weeks. Remember, however, that the Saudis carry out public beheadings not only for murder and rape but for crimes such as apostasy, blasphemy and witchcraft. Filipino workers in Saudi Arabia are subject to capital punishment for holding a Catholic mass. Sexual misconduct can be punished by stoning to death. These are the people who will help us to vanquish ISIS’s ideology?
The Middle East is a tough and mean neighborhood. The consequences of political failure can be a hangman’s noose or worse for you and your family rather than just a premature retirement from public life. As a result, Middle East politicians have an exquisite sensitivity not to those with whom they share values but to those expected to win. The United States can form a winning coalition against ISIS and Vladimir Putin by making clear that the US intends to win and that countries on the wrong side of the conflict will pay a price, while those who side with us will reap rewards. Coalition partners will be few and far between when the US shows ambivalence about the effort. The idea that the US can generate a stampede of support from Middle Eastern regimes by making the ineffective symbolic climate change gestures so beloved of the American left is simply embarrassing.