The American Petroleum Institute (API) recently took a break from hosting anti-cap-and-trade rallies for oil company employees, and used its spare time to put out a study claiming the American Clean Energy and Security Act (ACES) would be unfair to American oil refineries. Unfortunately their study uses some dubious assumptions – and makes some even more questionable claims.

API’s study (carried out by consulting firm Ensys Energy) outlines two major complaints.

• First, API whines that the bill only sets aside 2.25 percent of emissions allowances for refiners, while the electricity sector gets 35 percent of the available allowances.
• The second, related claim is that ACES would increase the cost of doing business so much that companies would turn to cheaper overseas refineries instead.

Before we even address those complaints, there’s one thing I have to point out — API is relying on bad modeling and cherry-picked results to create its case.

• The results quoted in API’s news release come from running a scenario that severely restricts international offsets and allows no expansion of low-carbon technologies beyond what would happen without a clean energy bill. There’s no basis for those assumptions, but they do manage to skew the results to make refineries look more vulnerable.
• However, if we consider the “basic case” (or, “most likely”) model outcome in Ensys’ report, it is clear that the activity of domestic refineries is expected to increase compared to their current levels.

But let’s ignore the study results for a minute, and just take a look at API’s two complaints.

First, API seems to think refineries are getting picked on because they aren’t getting as many free allowances as the electricity sector. But — they ignore the reasons why the two are not comparable.

• The electricity sector allowances they’re talking about actually benefit American consumers. The allowances are first handed to local distribution companies, or LDC’s, but the value of the allowances doesn’t stay there. LDCs are required to use the value of those allowances to protect consumers from electricity price increases. Giving allowances to the LDC’s really means giving allowances to American ratepayers.
• Oil refineries, in contrast, are private companies whose owners are free to pocket any money they get from their emissions allowances. So giving allowances to oil refiners really means — giving money to oil refiners. (API might like those two ideas equally, but no one else does.)

Of course, if the oil refiners were willing to accept the same regulations as utilities, and guarantee that their emissions allowances would be used to lower the price of a gallon of gasoline, that’s an idea worth discussing. API’s study doesn’t put that offer on the table, though.

Second, API says that America could become dangerously dependent on foreign refineries. (API President Jack Gerard says, "Climate legislation should not come at the expense of U.S. economic and energy security.")

But – U.S. refineries have cornered 90 percent of the market for domestic gasoline. Homegrown refineries dominate the market because there are, inherently, strong cost advantages for domestic production, and little incentive to send business overseas.

• Different states have different regulations governing oil refining, which favors local businesses and makes it difficult or impossible for foreign refineries to compete.  In fact, in other environmental scenarios, such as emissions standards for cars, industries claimed exactly that – no company could possibly create 50 slightly different products to sell under 50 different state rules, and only local businesses could thrive under those conditions.
• It’s also significantly easier and cheaper to ship crude oil than refined gasoline. That makes it much more efficient to import crude oil and do the refining right here at home. That’s a physical difference that won’t go away if we pass a clean energy bill.

EDF did our own analysis of the impact of climate legislation on oil refineries.  Here’s what we found:

• The expected added cost from a clean energy bill, per gallon of refined gasoline, is less than one cent per gallon.
• Analysis also suggests that refiners can be expected to pass on the majority of any cost increase to their customers.
• As a result, between 1.4 and 1.7 percent of total allowances would be enough to compensate domestic refineries – in full — for the added costs associated with reducing their process emissions.
• Since ACES allocates 2.25 percent of allowances to oil refiners, EDF believes the allocations set out in ACES are more than generous.

Given all this, the bill should not affect the competitiveness of American refineries.

A larger problem might be the unfortunate effect of API’s study on the average American consumer. Outside the industry, a lot of people don’t draw a distinction between “oil” and “gasoline.” A quick read of news articles about the study could imply that ACES will increase America’s dependence on foreign oil – when one of the most valuable aspects of the bill is that it will do just the opposite. Under ACES, the EIA predicts that the U.S. would reduce its consumption of oil by 344 million barrels in the year 2030 alone. That’s a vital benefit to our national security as well as our environment.

A whopping amount of our own oil and the imported oil would still be refined into gasoline here, in spite of API’s fears. After all, even their own biased study predicts increasing U.S. refinery activity.  All in all, clean energy legislation is still good for all Americans – including oil refineries.

This is a guest post by Charles F. Wurster, Ph.D. He is Professor Emeritus of Environmental Sciences at the State University of New York at Stony Brook, and is a founding trustee of Environmental Defense Fund.

Global warming and climate change will severely affect life on Earth during this century. It is primarily caused by burning oil and coal, along with deforestation.  Numerous effects are already occurring around the globe. Yet the American Clean Energy and Security Act (ACES), intended to reduce climate change, passed the U.S. House of Representatives by a tiny 219-212 majority.  Why wasn't it unanimous?

Some thought the bill too strong.  Others considered it too weak.  Some believed it would cost too much.  Others don't take climate change seriously.   Only half of Americans think human activities are the cause.

Opponents of the bill have intentionally disseminated disinformation and confusion about climate change. Many companies also oppose the bill because they suspect it would reduce their profits.  There's a vast amount of wealth and political power amassed in the status quo.  Why should they change?

Despite the many compromises needed to gain the votes for passage, Congress must pass ACES if we are to diminish climate change, the greatest issue of our time.  The basic structure of the bill is a cap-and-trade system, which is misunderstood by many Americans, including congressmen.   That hampers passage.

Cap and trade was pioneered in the 1980s by Dr. Dan Dudek, an economist with Environmental Defense Fund, to combat acid rain.  EDF convinced the first President Bush to include it in the Clean Air Act of 1990, and by 2000 emissions of sulfur dioxide, the cause of acid rain, were cut in half at a small fraction of the original cost estimates by the industry.  Compliance was 99% because its mandate was unavoidable.  Cap and trade became the most effective anti-pollution device in recent memory.

Now cap and trade is being applied to carbon dioxide (CO2) emissions, the main pollutant causing climate change.  Cap and trade was adopted internationally under the Kyoto Protocol, which was rejected by the second Bush Administration but ratified by 184 other countries.

To be clear about how cap and trade works, consider a simple example:

• A company we will call "Easy Inc" is able to reduce CO2 emissions easily and cheaply, but has not done so for lack of an incentive.
• Another company called "Difficult Inc" would find it difficult and costly to reduce its emissions.

Under cap and trade, next year they will only receive 90% of their present emissions allowances (the "cap"), so they must reduce emissions 10% next year. Here is what they do:

• Easy, Inc., has no problem reducing emissions by 10%, but Easy can sell on the carbon exchange (the "trade") any extra allowances if it abates more than its required 10%.  So Easy abates 20%.
• Difficult, Inc.,  does not abate at all.  Instead, Difficult buys Easy's extra 10% of allowances.

Under the C&T system, Easy has reduced emissions for both Easy and Difficult, and the average CO2 abatement of 10% has met the system requirement.  Easy has profited by selling its extra allowances to Difficult, and Difficult has abated through Easy at a lower cost than if it had done so itself.

Difficult also has an incentive to seek ways to reduce future emissions so that it doesn't have to buy more allowances.  Everyone knows that available allowances, the cap, will continue to decline by law in the future.  The government does not tell polluters how to meet the requirements, thereby stimulating innovation, emissions are carefully monitored, there is no incentive to cheat, and compliance rates will be high.

The ultimate goal is an international treaty with a carefully structured and regulated cap and trade system that includes all nations, along with a marketplace for buying and selling CO2 allowances.  Abatement will therefore proceed by the cheapest and best technologies — economists call it economic efficiency — and investments are thereby channeled into clean, efficient, low-carbon energy systems throughout the world.  It will no longer pay to pollute; instead it will pay to abate pollution.

Cap and trade will set off a stampede toward energy efficiency because efficiency improvements are the cheapest, often most profitable, and quickest route to emissions abatement.  Countries with extensive rain forests, such as Brazil or Indonesia, can sell allowances to keep their forests intact, putting a value on standing forests with their vast carbon storage, instead of gaining short-term profits by cutting them down.  Preserved biodiversity is an additional huge benefit.

The ball is in our court and the time is now!  The rest of the world, already functioning under the limited Kyoto Protocol, waits to see whether the USA will act.  The climate bill containing the basic cap and trade structure, however much compromised to pass Congress, must become law for the world to build on that structure to limit climate change.

People are using the word "astroturfing" a lot lately, but this video makes it clear that the people working for the lobbyists trying to block cap and trade legislation stooped to a level even lower than that.

Angry? Share the video with your friends!

I promised earlier today in my quick review of the flawed study from the National Association of Manufacturers that a full analysis was on the way. Here it is [PDF].

The analyis concludes, as I said this morning that "assumptions matter — and unrealistic assumptions make for outlandish results."

The National Association of Manufacturers and the American Council for Capital Formation today continued their campaign of public deception against the American Clean Energy and Security Act with the release of an analysis that purports to show manufacturing declines and job losses if the bill passes.

Problem is, NAM’s numbers are about as trustworthy as the forged letters sent by their allies to members of Congress, which faked opposition to the ACES bill from local community groups. They are no more real that the Birthers’ imaginary Kenyan birth certificate for President Obama, which names a laundry detergent as the registrar. (Really.)

As you know, NAM has a long history of opposing virtually every major environmental law, often using similar bad arguments with flawed data. NAM/ACCF’s study from last year was seriously flawed – it claimed to look at that year's Lieberman-Warner bill, but it ignored important provisions of the legislation and imposed artificial constraints on the economy’s ability to reduce emissions.

The analysis presumed there would be no banking of emission allowances and only limited use of offsets. The study also artificially constrained the use of renewable energy and carbon capture and storage.

In short, they applied make-believe assumptions to a make-believe bill, and they are doing it again:

• NAM/ACCF’s conclusions assume that ACES will spur 10 to 25 GW in new nuclear power. Compare that to the Energy Information Administration’s base scenario, which predicts 10 GW without the bill – and as much as 95 GW with the bill.
• NAM/ACCF assumes that 95 percent of cost-saving offsets will come from domestic projects and five percent from overseas. In fact, ACES provides for a 50-50 split between domestic and international offsets, and the latter are expected to be more cost-effective.

These are but two questionable assumptions from the very few that NAM and ACCF disclosed – from a model with a huge array of inputs. No one will ever know exactly how they reached their numbers, because important details about their analysis and underlying assumptions remain in a black box.

We’ll have a more detailed rebuttal to NAM/ACCF’s claims for you later today.

In the meantime, here’s what we already know from independent, transparent analysis:

• The Energy Information Administration says the cap on carbon pollution in ACES can be achieved for $83 per year per household – or a dime a day per person. One of the reasons for the affordability is that increases in electricity and natural gas bills of consumers are substantially mitigated through 2025 by the allocation of free allowances to regulated electricity and natural gas distribution companies.
• The Congressional Budget Office found [PDF] that ACES would cost the average household $175 a year by 2020, or about the cost of a postage stamp per day. The CBO also found that the poorest 20 percent of American households would actually see a net cash gain under the bill of about a $40 in 2020. The study factored in the value of emissions allowances that will be rebated to consumers.
• The Environmental Protection Agency puts the cost of a carbon cap on at $88-$140 per household per year over the life of the program – or about a dime a day per person. (Sound familiar?)
• The Energy Information Administration (see above) also says that ACES would reduce our dependence on foreign oil. The U.S. would reduce its consumption of oil by 344 million barrels in the year 2030 alone, a cut of more than 12 percent from predicted imports for the same year without the bill. To put that figure in perspective, 344 million barrels of oil are worth almost $26 billion today.
• The United States Global Change Research Program found that America will face hundreds of billions of dollars in costs if we don’t take steps to stop climate change. The cost of inaction will include: sea level rise of as much as two feet that will destroy property along our coasts; stronger hurricanes and other storms that will damage cities; and severe droughts that will devastate agricultural sectors.

Why should you go to a Congressional town hall meeting and stand up for strong action on clean energy?

Because, according to the Wall Street Journal, the American Petroleum Institute, the lobbying group for Big Oil, is organizing their troops to pack town hall meetings.

Apparently, they admired the work of the anti-health insurance reform protesters, so they're spending some of their billions in profits to make congressmen believe Americans don't want clean energy.  As we wrote earlier, most Americans DO support clean energy. But that won't matter if our elected officials don't hear from our side, too.

So please see where your representatives are holding a town hall meeting, and go stand up for clean energy.

If there isn't a town hall in your area, you can still weigh in. Call your Senator's office and tell them how you feel.

Whichever way you speak up, the point is the same — Big Oil is trying to manufacture a picture of Americans that just isn't true. And we don't have to let them.

Looks like the American Clean Energy and Security Act (ACES) is one of the most popular kids on the Capitol Hill campus.

In spite of months fear-mongering and outright lying by opponents, a new poll says 71 percent of likely voters favor the bill.

The Zogby poll sampled people across the country and found:

• 71 percent favor the climate bill that was recently passed by the House of Representatives.
• 67 percent think Congress is either "doing the right amount" or "should be doing more" to address global warming.
• 51 percent think that "efforts to reduce global warming and promote clean energy" will lead to new job creation,  and
• another 17 percent think the efforts will not affect American jobs at all — which means less than one-third are worried the bill will cause job losses.
• Favorable views of the bill were high among all age and income groups; ditto for the belief that environmental efforts will create new American jobs.
• Even Republicans aren't as opposed to the bill as their party leaders might want them to be; 45 percent have a favorable view of ACES. (A whopping 89 percent of Democrats and 73 percent of Independents like the measure)

Says Zogby analyst Sam Rodgers:

Clearly, voters strongly favor the ideas outlined in the bill. Support for action on clean energy and energy efficiency was strong coming out of the election, and it is still strong today.

The moral of the story: Next time you read one of those opposition pieces about how support for ACES is eroding — don't believe it. Americans see the potential in clean energy.

See the complete methodological statement on the survey.

Sometimes, national security is not just a matter of having a larger army, or superior weapons, or better intelligence. It also means preserving political stability around the world, and spreading economic prosperity as widely as possible.

Instability encourages ideological extremism, and poverty provides a steady supply of terrorist recruits, which can directly affect U.S. security. From Afghanistan to Somalia, we’ve seen how weak states and economic hardship can lay the foundation for political crisis and war.

Many military leaders say global warming poses a grave threat to our security, precisely because it will promote economic instability and political unrest around the world. Former Republican Sen. John Warner, a staunch and highly respected supporter of the U.S. military, strongly supports action on climate change, in part for national security reasons. Read Senator Warner’s recent testimony supporting U.S. leadership in reducing greenhouse gas emissions. [PDF]

Climate change is what military analysts call a “threat multiplier,” meaning it will intensify problems that already threaten us. Here is what a world with an unstable climate might look like:

• We’ll see more crop failures and drought, famine, and disease, leading to mass migrations of people across borders
• Scarcity will cause more frequent wars over natural resources, such as water.
• A sea level rise of three feet – near the low end of predictions for 2100 – would create 100 million environmental refugees around the world.

To make matters worse, much of this will happen in volatile regions already on the brink.

Don’t take our word for it. Here’s what military leaders and experts say:

• In a recent report, eleven retired U.S. admirals and generals cited that growing instability from climate change is leading to greater U.S. military operations abroad. Among them were Gen. Gordon Sullivan, former Chief of Staff of the United States Army, and former Marine Corps Gen. Anthony Zinni. According to Sullivan, “We have to act now [on global climate change] if we are to avoid the worst effects.”
• Likewise, the bipartisan Center for Strategic and International Studies (CSIS) has issued a report on the national security impacts of climate change [PDF] predicting that global warming will produce “heightened internal and cross-border tensions caused by large-scale migrations; conflict sparked by resource scarcity, particularly in the weak and failing states of Africa; increased disease proliferation, which will have economic consequences; and some geopolitical reordering as nations adjust to shifts in resources and prevalence of disease.” Among the authors was James Woolsey, former director of the CIA. The board of CSIS includes former National Security Advisors Henry Kissinger, Zbigniew Brzezinski, and Brent Scowcroft.
• Finally, the National Intelligence Council completed the first-ever National Intelligence Assessment of climate change last year. Although the report is classified, the chairman of the Council summarized key findings before a Congressional committee: “We judge global climate change will have wide-ranging implications for U.S. national security interests over the next 20 years.” [PDF]

The climate bill now before Congress will help avert widespread and dangerous environmental changes that would lead to global instability, by cutting greenhouse gas emissions 83 percent by 2050. Another benefit will be reducing our reliance on imported oil. The U.S. has five percent of the world’s oil reserves but consumes 25 percent of the world’s oil. Much of the world’s oil comes from the Mideast, a focal point of political instability and extremism, making reduced dependence on imported oil a national security imperative. By moving the U.S. toward cleaner energy sources like wind and solar, the climate bill will reduce our reliance on fossil fuels like oil.

Many of the nation’s top military leaders and foreign policy experts are calling global warming a national security threat, as well as a critical environmental threat. Congress needs to avert this coming crisis by passing the climate bill.

The dog days of summer are making everything seem slow and sleepy — except in Congress, where efforts to finish work on clean energy legislation are in high gear. (You might have guessed this from our super-charged pace of blog posting today!)

In addition to everything else going on, EDF experts are busy testifying at hearings on the Hill:

• Last week, Jennifer Havercamp testified before the House Select Committee on Energy Independence and Global Warming about intellectual property rules and how they'll affect the development of new technologies to fight climate change.
  (See her written testimony [PDF].)
• Tuesday, Nat Keohane testified before the Senate Finance Committee about how clean energy legislation will strengthen the economy.
  (See his written testimony [PDF].)
• And tomorrow, Fred Krupp is testifying before the Senate Committee on Environment and Public Works. The hearing is on "Climate Change and Ensuring that America Leads the Clean Energy Transformation." Fred is summing up all the evidence that we can meet 2020 emissions targets – at low cost – while creating jobs. (Update: Here's a link to the written testimony.)

Between all this testimony, reviewing new analyses and studies, and launching a new ad campaign, we are keeping the heat on Congress this summer!

A just-released analysis from the Energy Information Administration (EIA) says the cap on carbon pollution in the American Clean Energy and Security Act of 2009 (H.R. 2454) can be achieved for $83 per year per household – or a dime a day per person.

One of the reasons it's so affordable is that increases in consumers' electricity and natural gas bills are substantially mitigated through 2025 by the allocation of free allowances to regulated electricity and natural gas distribution companies.

Nat Keohane, EDF's director of economic policy and analysis, says this:

This analysis confirms what every other credible study has found, and it – once again – refutes the widely reported scare tactics about the cost of the cap and trade bill. Opponents of action will always try to cherry-pick the numbers and use models with biased assumptions. The EPA, EIA and CBO are the non-biased standard for economic analysis.

For a dime a day we can solve climate change, invest in a clean energy future, and save billions in imported oil.

The analysis also shows that the climate bill passed by the House would reduce our dependence on foreign oil – the U.S. would reduce its consumption of oil by 344 million barrels in the year 2030 alone, under the provisions of the bill. That's a cut of more than 12 percent of predicted imports for the same year without the bill.

Other key points about the EIA analysis:

• It considers only the costs of reducing global warming pollution, and does not take into account the many potential benefits.
• It has similar findings to two other impartial and substantive studies done recently, from the Environmental Protection Agency and the Congressional Budget Office.
• A leaked draft of the EIA report, which was covered in some early media stories, contained an error. The average yearly change in consumption per household for the years 2012-2030 is $83 — NOT $142. The correct figure is in the final version.