Meme watch: “The economic crisis has kneecapped climate legislation”

There is an unusually dimwitted bit of “conventional wisdom” circulating among conservative economic (“That almost certainly means, at least according to the crack political team on the panel with me, that we will not get any sort of cap and trade”) and energy (“Climate change may be on the back burner for now due to the economic slump”) blogs that an Obama administration and its majority Democratic Congress are going to do little or nothing about climate change due to the current/impending economic crisis.

This is ludicrous on its face. President-elect Obama has stated numerous times that his number one priority is implementing a comprehensive alternative energy program as the key to creating a new economy. He understands how the climate, food, health care, energy, economic, and infrastructure challenges plaguing our country and the world are intertwined and need to be addressed holistically.

Senator Henry Waxman from California, who has been relentless in his efforts to root out the Bush administration’s obstructionist tactics in the EPA on climate change, is now challenging Senator Dingell for the chairmanship of the Energy and Commerce committee. Dingell has long been in the pocket of Detroit’s auto industry, and has a history of blocking legislation that would help reduce climate change. There is only one possible reason for Waxman’s challenge in the midst of what should be a time of Democratic celebration and solidarity- the coming Obama administration correctly views Dingell as an obstacle to its goals on energy and climate change, and Waxman has received at least a tacit go ahead to take him on. [It looks like Joe Romm is following this as well, so far here and here]

For those looking for a sign that an Obama administration is serious about climate change, this couldn’t be clearer. Rather than preventing action on climate and energy, this crisis will provide the Obama administration with a decisive path to action, and he obviously isn’t afraid of playing hardball to achieve his goals.

[LATE UPDATE: Gristmill has more on Waxman vs. Dingell.]

16 responses to “Meme watch: “The economic crisis has kneecapped climate legislation”

  1. I am a bit sceptical when it comes to Obama, I await to see if we get solid policies on peace, the environment and social justice.

  2. My Q would be, where did this meme start, and who’s the pusher…
    Read Paul Graham’s piece The Submarine, on trend stories and PR.

  3. It’s not a meme, it’s simple math — the global economy is in much worse shape than more people realize, and it’s just beginning to fall apart.

    A great resource to keep an eye on is Yves Smith’s Naked Capitalism blog. It’s a technical economics/finance blog, but it’s highly regarded, and you can start to get the idea about just how bad it is with posts like these:

    China may be heading for a severe economic slowdown .

    Investment experts, who’s job it is to look at the economic treads and make the best predictions they can, are scared, and so are their clients, which is why trillions in wealth has been wiped out over the past week. And if you think raising taxes on the wealthiest (who are becoming increasing LESS wealthy with each passing day) will fix everything — think again: Obama & Democrats Likely To Cause A Deeper, Longer Recession.

    I don’t know if any of you guys have a regular day job, but I’d start saving as much $$ as you can right now, and position yourself for the worse — on the up side, you’ll have plenty of time for blogging.

  4. Here’s a bit more — a straightforward explanation of why the U.S. and the world is probably headed for a very serious global recession. From the Marginal Revolution blog:

    Wealth Shock:

    “This is truly incredible. Homeowners have lost more than $5 trillion in housing wealth. There is a very well established wealth effect whereby $1 of housing wealth is estimated as leading to 5 to 6 cents of annual consumption. This implies that the loss of wealth to date would cause consumption to fall by $250 billion to $300 billion annually (1.7 percent to 2.0 percent of GDP). If you add in the loss of around $6 trillion in stock wealth, with an estimated wealth effect of 3-4 cents on the dollar, then you get an additional decline of $180 billion to $240 billion in annual consumption (1.2 percent to 1.6 percent of GDP).

    These are huge falls in consumption that would lead to a very serious recession, like the one we are seeing. This would be predicted even if all our banks were fully solvent and in top flight financial shape. Even the soundest bank does not make loans to borrowers who it does not think can pay the loans back (except during times of irrational exuberance). ”

    This recession is going to be one for the record books. Addressing climate change as Obama (and everyone else) promised is effectively off the table for now . . .

  5. Some places, like CA and FL, think that energy efficiency & sustainable energy are *good* for their economies, and of course, are also good for climate. CA has thought this for a while.

    This recession is *nothing* in comparison to the one we’re going to see if we don’t handle the century-long downturn in fossil fuel energy properly.

    i.e., fossil fuels are energy *capital*, and either we invest enough of it in energy-income before the capital disappears, or else we can go back to an economy that approximates 1850. of Course, if we burn too much coal in the meantime, we know what happens…

    “Burn it soon” ==> leave *nothing* for the great-grandchildren. if you are a fossil-fuel exec, this may be OK.

    As for the relationship of energy & wealth, see Bob Ayres, ASPO 2005, especially the last page that shows US GDP trajectories as functions of efficiency.

  6. Mashey,
    you are right about energy efficiency an sustainable energy being good, but only in the *long run*, i.e., it’s all an investment now with a payoff (i.e., ‘profit’) later.

    The problem is, there’s nothing to invest: banks are not lending, the Fed’s leading balancing sheet is maxed out with all the bailouts (forget about GM, Ford, etc. developing energy efficient cars — they’ll be lucky to even be in business by the middle of next year). Remember, it’s so bad that w/out any bailout, there would have been no auto industry for Dingell and Waxman to fight over — it will have been gone by early next year.

    Finally, the news on the unemployment front is seriously grim:

    “iTulip.com has observed and analyzed changes in the US economy for over ten years. In the current economic cycle, since 2006, we have focused on median duration of unemployment to give us early warning of rising unemployment.

    Here we extend that analysis to point us to where unemployment is headed overall and also delve into 14 major industry sectors, including one you work in, to fine tune our forecast.

    There is no doubt in our minds that this is The Big One — a depression is all but certain unless the US develops and executes a post WWII scale stimulus plan starting in 2009, but the structure of that stimulus is critical to avoid turning the US into a sclerotic economy dominated by large corporations and big government. In any case, we forecast 10 million jobs lost by the end of next year. ”

    Unemployment by industry: Brace for Impact .

    The economic crisis is starting to overwhelm business and governments.

    Germany ‘s Chancellor Angela Merkel, who is probably the woman most responsible for the Kyoto Protocol, now calls drastic cuts in carbon dioxide emissions, “ill-advised climate policy”. Her foreign minister, Frank-Walter Steinmeier, who last year pronounced global warming as a grave threat to world peace, now says that “this crisis changes priorities” and that “interest in protecting the climate will change because of such a crisis”.

    The UK has some of the most progressive global warming taxation and regulation. This has pushed residential energy costs up to an average $600 per year OVER where they were a year ago. Britain’s National Housing Administration estimates that 5.7 million British households will spend more than 10% of their income on fuel and energy next year.

    The last thing any politician wants to deal with is massively falling employment AND rising energy costs from taxation and regulation.

    Lets hope iTulip is wrong. If they’re not, we’re all about to live through a downturn not seen since the 1930’s. If Germany has politically abandoned making drastic cuts in carbon dioxide emissions, it hard to imagine that other countries won’t follow suit.

    Frankly, that’s what scares me most — if they’re willing to back off making drastic cuts in carbon dioxide emissions, they must be scared. I’d rather have the cost of making drastic cuts in carbon dioxide emissions rather than what we’re likely to go though. God help us.

  7. Pingback: Bytes and Blogs « Greenfyre’s

  8. “Global Warming Deniers Turn Into Delayers:”

    I guess this would incluide . . . the DNC & Obama:

    Recall the Warner-Lieberman Climate Security Act debacle on Capitol Hill this past June. This legislation would have mandated that carbon dioxide emissions be cut by 60 percent from where they were in 2005 by 2050. The bill would have set up a cap-and-trade scheme to ration carbon dioxide emissions. Such rationing aims to increase the price of fossil fuels relative to carbon neutral sources of energy and thus encourage consumers and energy producers to shift to higher-priced climate-friendly energy.

    The bill’s proponents had the bad luck to propose it just as gasoline prices were soaring to historic highs. Senators McCain and Obama did not show up to vote on procedural motions that aimed to push the bill forward.

    The candidates were hiding. The candidates both support the concept of cap and trade, but neither of them showed up.

  9. Correct me if I’m wrong, Charter of Dreams, but as I understand it Lieberman-Warner-Boxer’s bill allowed for substantial use of offsets, which (unless heavily, heavily regulated) are easily exploitable by profit-maximizing buisnessmen (on both the seller and buyer side). By some accounts, this would have resorted in no net reduction until after 2025.

    An individual consumer concerned with the climate can find legitimate offset programs, but if a federal cap-and-trade-with-offsets program is set from above, then false offsets (“No, seriously, I wasn’t planning on insulating this building at all, therefore 100% of its insulation can be considered an offset!”) become the hottest commodity on the market for those solely interested in short-term bottom-lines, meaning little if any actual reduction takes place.

    The most important goal relating to climate — and indeed, future economic prosperity unburdened by refugees and resource scarcity — is reduction of atmospheric CO2. If offsets are included in any plan to manage this, they must be strictly regulated (bigger government) or else they subvert the whole system. It’s simpler and more effective to simply leave them out of the overarching program, and, if necessary, work on subsequent legislation for offsets based on something like charity donation (i.e. offset providers meet registration criteria, and purchased offsets result in consumer tax receipts; the registration process includes auditing to avoid “rip-offsets” that advertise greater cuts than they provide, and the tax-deductable portion encourages consumers to go to offset providers that pass such audits).

    Including offsets in your cap-and-trade bill is a gambit: It forces more regulation (bad for libertarians) or it cripples the bill (which is bad for everyone). Avoiding offsets prevents an easy-way-out loophole on emissions reduction (which is probably more expensive than a false offset (since it doesn’t allow you to externalize your costs), but it actually reduces CO2), without any additional regulation over and above the cap-and-trade bill. Which is more desirable on all fronts?

  10. Brian D. Thanks for the great detailed explanation of this bill and the trade offs.

    As far as I understand it, the bottom line was basically to impose rationing with the aim to increase the price of fossil fuels relative to carbon neutral sources of energy and thus encourage consumers and energy producers to shift to higher-priced climate-friendly energy.

    Whether this is good or bad, whether it will work or not, I don’t know. I just wanted to point out to Greenfyre that “Delayers” are hardly deniers as this would include Obama. Neither he nor McCain lifted a finger to help the bill, which is telling p0litically.

    Whether or not the bill would have raised the cost of energy significantly is debatable. What’s not debatable is that Obama feared it would, so he steered clear of it.

    This gets back to my main point — the rapidly deteriorating global economy has governments so scared and panicked that global warming is now one of the last things they’re thinking about (no matter how much they reaffirm their political promises in public).

    Worse, while panic hardly helps, it’s easy to see why they’re panicking: things are falling apart, and they can’t stop it:

    See: Bad Bank Debts Bigger Than National GDPs. The Numbers Needed for Rescues just keep Getting Bigger and Bigger.

    Just today, the cost of protecting corporate bonds from default surged to records around the world as the prospect of U.S. automakers filing for bankruptcy protection fueled concern of even MORE! bank losses and a deeper recession: http://www.nakedcapitalism.com/2008/11/credit-defaults-swaps-peg-corporate.html.

    Finally, also today, global markets smashed through their widely believed support levels and reached new lows breaking historic loss records along the way (see: http://www.ritholtz.com/blog/2008/11/record-breaking-data/):

    “It’s the end of the world as we know it,” said Raymond Tang, who oversees $5.8 billion as chief investment officer at CIMB-Principal Asset Management Bhd., a unit of Malaysia’s second-biggest bank. The economic slump is “the worst I’ve seen on a global scale, with no region to help each other,” he said.

    World governments are clearly in high gear trying to stop a major global wide depression. The bad news is — and they know it now — their best efforts are hardly making a dent, they’ve run out of monetary tools and good ideas, and now — they’re panicking.

    Again, God help us.

  11. And yes, if you guys still have jobs, start saving now, and reducing debt now.

    Michelle Girard of RBS Greenwich Capital dissects the jobless data for Simon Constable of Dow Jones, and explains how the bad situation will likely get a whole lot worse before it gets better:

    http://www.ritholtz.com/blog/2008/11/unemployment-horror-show/

    Melting glaciers are — or will soon be — off the headlines and out of the collective conscious for the time being . . .

  12. Charters, you seem to cast me as a supporter of the bailout (if I follow you correctly). Although I’m on the left of the economic spectrum, I opposed the bailout vehemently but also powerlessly (as I’m not a US citizen, taxpayer, or resident).

    One thing I’ve noticed is this: The majority of the efforts of the US government to date have been supply-side. They involve massive sums of money hurled at the upper echelons of the economy in an effort to stave off the problems caused by Greenspan’s ideological “flaw”.

    To date, I have not seen anything attempting to manage this from the demand side of the equation — apart from the proposed plan on Obama’s transition website. This plan, in part, includes job creation programs aimed at creating green jobs — simultaneously working toward both the climate and the economy, from the bottom up. (It remains to be seen if he can pull it off, but I’d like to note that others have suggested pretty much exactly the same thing.)

    I’m no economist, but I am a scientist (in training). It seems to me that you operate on the assumption that economics and ecology are separate beasts, that you can’t think about glaciers if you’re thinking about greenbacks. As others have pointed out, both terms stem from the same root word (Greek oikos, ‘house’), and more and more economists and environmentalists alike are seeing the opportunities that emerge when they work together instead of at odds.

    =====

    One last thing, by the way. Yesterday, our local Energy Club screened Enron: The Smartest Guys In The Room. One scene in there showed the news programs going wild, talking about record economic prosperity. The amusing part is, the Dow values shown on those clips were *far lower* than they are today. I’ve already said I don’t understand the full nuances of this, but it seems to me that rather than blindly worshipping growth and greed, simply joy in sufficiency would have circumvented nearly all of this. But I’m an idealist, so what do I know?

  13. Hey Brian,
    I think you hit the nail on the head: “The majority of the efforts of the US government to date have been supply-side. They involve massive sums of money hurled at the upper echelons of the economy . . .”

    The current credit crisis will be studied and analyzed for decades, but one thing we can probably/sadly be sure of — the bailout won’t work, and the alternative is NOT that the bailout will be have no effect, the ‘not working’ part means it’ll have a negative effect.

    But, that’s a whole other topic.

    The bottom line is this — Mashey’s comment above are exactly right about energy efficiency and a sustainable energy policy being good, but only in the *long run*, i.e., it’s all an investment for government and businesses now with a payoff (i.e., ‘profit’) later.

    The problem is, there’s nothing to invest: banks are not lending, the Fed’s leading balancing sheet is maxed out with all the bailouts, state budgets are broke.

    Think of it this way: you’ve run up your personal credit card to a debt to about 90% of your yearly earnings (the national debt is over 10 trillion and the U.S. GDP is about 14 trillion). OK, now you’ve lost your job. OK, now someone tells you that you need to go back to school to get a better job, but you’ve got to pay for it. And exactly what the return on that investment is uncertain.

    You’re in no position now to do this. Even if you wanted to go into more debt, no one would loan you the $$ even though they agree that you need a better job and education is the only way to get it. They’ll tell you that you need to solve your financial problem first before you can do anything else.

    California joblessness is now third in nation:

    http://hotair.com/archives/2008/11/22/california-joblessness-now-third-in-nation/

    Most of Cal. climate initiatives involves imposing costs on their economy and consumers, but — where will the $$ come from now?

    Cal. is thinking of raising taxes to confront their debt and expected shortfall from the recession. All that will do is drive business out of the state and cause more job loses and less revenue, and unlike the Fed. government, Cal. cannot just print money to pay for what it wants.

    In short, state and federal budgets are now tapped out, and so are we. All that can happen now is to let things play out as they did in the 1930’s and hope the government doesn’t make any serious monetary or fiscal policy decisions that will make things worse.

    I could be wrong about global warming concerns being put on the back burner for awhile. If I am, we’ll find out soon enough when Obama takes charge. The hope is that he will be able to “fix” the economy fast so that attentions can be turned back to health care, global warming, etc, but …. in the end it’ll be other factors that turn the economy around. See:

    The New Deal Didn’t Always Work, Either:

    http://www.nytimes.com/2008/11/23/business/23view.html?_r=2&partner=permalink&exprod=permalink

    http://econlog.econlib.org/

    http://economistsview.typepad.com/economistsview/2008/11/cowen-the-new-d.html

    ~ Best,
    Charters

  14. Oh, just to keep any readers of this thread up at night, if you think the economy will be well on it’s way to recovery by 2011, the bets aren’t on it:

    “30 reasons for Great Depression 2 by 2011”

    Read and shudder and pray Ms. FARRELL is wrong.

    Also pray that Naked Capital’s Yves Smith is also wrong when she has come to a similar conclusion, i.e., that the bailouts will have just kicked the can down the road a few months, until after the election. Early next year — times up! And after that, everything slowly, unstoppably and seriously starts to fall apart as the world slides into a global depression and god knows what else because of it (i.e., remember your history of the 30’s and 40’s). We may be headed into a similar upheaval for this century.

    Maybe they’re Farrel and Smith are wrong . . . let’s hope so . . .

  15. Pingback: The Myth of Being Too Poor for Sustainability « Smash the Mirror

  16. “The Way Things Break” indeed.

    Dubai may undergo sovereign default. If that happen, 2010 could very well be worse that 2009. Cap & Trade is already way on the back burner until sometime in 2010, if it’s not dead already. National default but Dubai will kill Cap & Trade, but that will be the least of anyone’s worries if Dubai falls. This so called Meme not only has legs — it’s kicking your ass . . .

    http://money.cnn.com/2009/11/27/news/companies/Dubai_bank_risks/index.htm

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