Sunday, August 4, 2019

A missing component of most Green New Deals.....

Michael Hudson: Global Warming and U.S. National Security Diplomacy

As Posted on August 4, 2019 by  (see Naked Capitalism)
By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is “and forgive them their debts”: Lending, Foreclosure and Redemption from Bronze Age Finance to the Jubilee Year.
Global Warming and U.S. National Security Diplomacy
Control of oil has long been a key aim of U.S. foreign policy. The Paris climate agreements and any other Green programs to reduce the pace of global warming are viewed as threatening the aim of dominating world energy markets by keeping economies dependent on oil under U.S. control. Also blocking U.S. willingness to help stem global warming is the oil industry’s economic and hence political power. Its product is not only energy but also global warming, along with plastic pollution.
This fatal combination of the national security state’s mentality and oil industry lobbying threatens to destroy the planet’s climate. The prospect of raising temperatures and sea levels along the coasts while inland regions suffer drought is viewed simply as collateral damage to the geopolitics of oil. The State Department is reported to have driven out individuals warning about global warming’s negative impact.1
The only attempts to restrict oil imports are the new Cold War trade sanctions to isolate Russia, Iran and Venezuela. The aim is to increase foreign dependence on U.S., British and French oil, giving American strategists the power to make other countries “freeze in the dark” if they follow a path diverging from U.S. diplomatic aims.
It was the drive to control the world’s oil trade – and to keep it dollarized – that led the United States to overthrow the Iranian government in 1953, George W. Bush and Dick Cheney to invade Iraq in 2013, and most recently for Donald Trump to isolate Iran while backing Saudi Arabia and its Wahabi foreign legion in Syria, Iraq and Yemen. Sixty years earlier, in 1953, the CIA and Britain joined to overthrow Iran’s elected President Mohammad Mosaddegh to prevent him from nationalizing the Anglo-Iranian Oil Company. A similar strategy explains U.S. attempts at regime change in Venezuela and Russia.
While seeking to make other countries dependent on U.S.-controlled oil, America itself has long aimed at energy self-sufficiency for itself. In the 1970s the Energy Research and Development Administration (ERDA) developed the environmentally disastrous plan to promote North American energy independence by tapping Canada’s Athabasca tar sands. About ten gallons of water are needed to make each gallon of synthetic crude oil. This water is treated as a free good, not factored into the cost of extracting syncrude. (I was the lead Hudson Institute economist evaluating ERDA’s plans, and was removed from the study when I protested that this might cause downstream water problems.) A byproduct of American energy self-sufficiency may be to make water scarcer and more expensive, especially as fracking pollutes local water resources while diverting an immense flow of fresh water as part of the extraction-and-pollution symbiosis.
The short-sightedness of America’s aggressive oil diplomacy is causing opposition in Europe as it buckles under unprecedented summer heat waves, just as U.S. cities are being devastated by drought, forest fires, floods and other extreme weather. Yet this has not dented the basic thrust of U.S. foreign policy to control oil.
Oil in the U.S. balance of payments
Control of oil has long been a major contributor to the U.S. trade and payments, and hence of the dollar’s ability to sustain the huge outflow of overseas military spending. In 1965 I conducted a study for the Chase Manhattan Bank and found that in balance-of-payments terms, every dollar of oil industry investment outflow is recovered in just 18 months. That is because hardly any of the reported import value of oil was paid to foreigners.
To the extent that the United States must import foreign oil, such trade has been limited to U.S. oil majors (on “national security” grounds), mainly from their own foreign branches. Only a small proportion of the price was paid in foreign currency. U.S. companies bought crude oil from their foreign branches at very low prices, and allocated all the price markup to their shipping affiliates in Panama or Liberia, along with shipping and freight costs, dividends and interest, managerial charges and charges for capital investment, depreciation and depletion. Most of what is counted as U.S. foreign investment in oil takes the form of machinery exports, U.S. materials and management, and so did not actually represent a dollar inflow. The effect has been to obtain oil imports at minimal balance-of-payments cost.
Since 1974, Saudi Arabia and neighboring Arab countries have been told that they can charge as high a price as they want for their oil. After all, the higher the price they charge, the higher the profits will be for domestic U.S. oil producers. The “conditionality” is that they must recycle their export earnings into the U.S. financial market. They have to keep their foreign reserves and most personal financial wealth in U.S. Treasury securities, stocks and bonds. A global move away from oil would impair this circular flow of oil-production gains into U.S. financial markets supporting domestic stock prices.
Solar energy technology and other alternatives to oil will not contribute nearly as much to the balance of payments as oil. Not only will environmentally friendly alternatives be outside the ability of U.S. diplomats to control or cut off energy supplies to other countries, but China is taking a leadership position in solar energy technology.
A major factor bolstering the oil industry’s economic power has been its tax-avoiding “flags of convenience” located in offshore banking centers. U.S. oil companies have long registered taken their profits from production, refining and distributing in Panama and Liberia. Over fifty years ago the treasurer of Standard Oil of New Jersey walked me through how the oil industry pretended to make all its profits in the tax havens that had no income tax – paying a low price to oil-producing countries, and charging a high price to downstream refiners and marketers.
One implication of this is that there is little political chance of any cleanup of tax avoidance via offshore banking centers, by Western investors and indeed the world’s criminal class and corrupt politicians, given the fact that oil and mining are the major beneficiaries. Weakening the lobbying power to prevent closing the tax loopholes that permit the fictitious cost-accounting of tax-avoidance centers would weakening the oil industry’s economic power.
U.S. foreign policy is based on making other countries dependent on U.S. oil
U.S. diplomatic strategy is to make other countries dependent on vital materials that U.S. diplomats can use as an economic lever. An early example were the food sanctions imposed in the 1950s to spur resistance to Mao’s revolution in China. Canada broke the grain embargo.
If other countries produce their energy by solar power, wind power or nuclear power, they will be independent of U.S. oil diplomacy and its threats to cut off their energy supplies, grinding their economies to a halt if they don’t endorse U.S. neoliberal economic policies. This explains why the Trump Administration withdrew from the Paris climate agreement to slow global warming.
U.S. Cold War 2.0 policy is aimed at isolating Russia
U.S. energy self-sufficiency finds its counterpart in the demand that Europe become dependent entirely on American “Freedom Gas,” at a much higher price than is available from Russia’s Gazprom and reject the Nordstream 2 pipeline, preventing it from obtaining lower-priced rival gas from Russia.2 The Trump administration argues that to avoid dependency on Russia, Europe should buy its oil and gas at much higher prices from the United States – about 30% higher, in addition to the expense of building LNG ports to transport liquified natural gas by ocean tanker instead of by Russian pipeline. “We’re protecting Germany from Russia and Russia is getting billions and billions of dollars in money from Germany,” Trump complained to reporters at the White House during a meeting with Polish President Andrzej Duda.3
On July 31, 2019 the Senate Foreign Relations Committee voted 20 to 2 to back the “Protecting Europe’s Energy Security Act” sponsored by right-wing Republican Ted Cruz and Blue Dog New Hampshire Democrat Jeanne Shaheen. Companies in Switzerland and Italy were first to be censored.
Global warming and GDP accounting
Warmer air temperature means a higher rate of evaporation, and hence more rain, tornados and flooding, as we are seeing this year. A related result will be drought as glaciers melt and no longer feed the major rivers on which dams have been built to generate electric power. The seeming irony is that these effects of global warming and extreme weather have become bulwarks of the rise in U.S. GDP. The cleanup costs of air and water pollution, the expense of rebuilding flooded or damaged homes, crop destruction, the increased cost of air conditioning, of coping with the spread of injurious insects northward and the rise in medical and health costs may actually account for all its growth since 2008.
Neoliberals celebrated the End of History after the Soviet Union dissolved in 1991, promising an era of new growth as “the market” became the world’s planner. They did not spell out that much of this growth would take the form of coping with the short-termism of the oil industry and other rent extractors living in the present and taking their money and running.
What factors should a Green Policy emphasize?
As Mark Twain quipped, “Everyone talks about the weather, but nobody does anything about it.” In today’s political world, doing something about global warming means taking on a set of goliaths that go beyond the oil and gas industry. It is one thing to say that global warming, climate change and the resulting extreme weather are existential threats to present-day civilization and economies. It is another to spell out the preconditions for solving the problem in the sphere of economic and tax reform, military and U.S. national security policy.
A Green program cannot succeed without confronting the National Security state’s mentality aiming at U.S. oil supremacy. U.S. national security has become a war threatening the security of the entire globe. Threatening to freeze countries in the dark if they do not follow U.S. policy and isolate Iran and Russia, the United States is burning itself up along with the rest of the planet.
Stopping global warming requires a tax policy to close down the special privileges promoting oil industry profits including the use of “flags of convenience” in offshore banking centers as a means of tax avoidance. A Green program logically would include a natural-resource rent tax (as classical economists advocated throughout the 19thcentury), and charges for what economists call “external economies,” that is social costs that are “externalities” to corporate balance sheet. Companies should become liable to reimburse society for such costs.
Imposing a tax on oil usage would raise the price of gasoline, but would not deter consumption much in the short run because car drivers and public utilities already are locked in to oil-using capital investments. A more effective response would be to reduce the profitability of oil by closing the tax-avoidance loopholes and “flags of convenience” that the industry’s lobbyists have created. “Oil industry accounting” leaves “Hollywood accounting” and Donald-Trump style real-estate accounting in the dust.
The public relations problem with this solution is that this practice of pretending to “earn” all one’s income in small island enclaves with no income tax has become so widespread that it has created an enormous vested interest now including the leading IT giants, industry and real estate. Depriving tax accountants of recourse to such tax-avoidance centers also threatens America’s National Security state by challenging its perceived national interest in attracting the world’s criminal capital to these enclaves as a bulwark of the U.S. balance of payments. The world’s wealthiest corporations and tax evaders are aligned against an economic policy that would most help reduce the carbon footprint by moving beyond oil and gas.
To implement a successful Green policy program, it thus is necessary to move beyond the environmental problem to take on a broad and wealthy array of vested interests. They will cite free-market ideology as justification for taking their money in the short run, without care for the weather disaster they are causing. That makes the task much more daunting, and also may limit the ideological appeal of a real Green program.
In countries such as Iceland and Germany, neoliberal Green Parties tend to be centrist and conservative when it comes to supporting banks and the financial sector, and endorse a market-based bonanza of carbon trading rights to be bought and sold by Wall Street speculators. The problem is that such “market-based” solutions must fail, because markets are short-term and do not take account “externalities.” Are Greens willing to criticize this “market philosophy” and its tunnel vision? Without such a challenge, Green parties will appeal largely to “feel good” voters who want to register their politically correct concern without doing much to actually solve the underlying problem.
We indeed seem to be entering the End Time. It is turning out to be the antithesis of the neoliberal End of History that was being celebrated in 1991 as free market victory after the Soviet Union collapsed. It is a crisis of Western civilization, not its apex.
Notes
1  Rod Schoonover, “My Climate Report Was Quashed,” New York Times op-ed, July 31, 2019, reported that the White House blocked his report on the adverse effects of climate change on the ground that “the scientific foundation of the analysis did not comport with the administration’s position on climate change.”
2  Regarding U.S. National Security Strategy (NSS) of Energy Dominance, see Ben Aris, “Busting Nord Stream 2 myths,” Intellinews.com, August 27, 2018. U.S. Secretary of Energy Rick Perry has likened U.S. gas to American soldiers liberating Europe from the Nazis. "The United States is again delivering a form of freedom to the European continent," he told reporters in Brussels earlier this month. "And rather than in the form of young American soldiers, it’s in the form of liquefied natural gas." See also and https://truthout.org/articles/freedom-gas-will-be-used-to-justify-oppression-at-home-and-abroad/.
3  “Euro Slides After Trump Threatens Sanctions To Stop NordStream 2 (Again!),” Zero Hedge, June 12, 2019.  

Tuesday, June 11, 2019

Will California's Deeply Flawed Cap-and-Trade Program Become Even Worse ?

Here is a well researched work by Lisa Song and associates at Pro Publica entitled, An Even More Inconvenient Truth: Why Carbon Credits for Forest Preservation May be Worse than Nothing. The full work is worth your read and for California readers it is essential that you spread the word: the Air Board is on the verge of worsening an already deeply flawed pollution trading scheme (aka cap-and-trade).
Many thanks to Lisa Strong and the folks at ProPublica....

"RIO BRANCO, BRAZIL — The state of Acre, on the western edge of Brazil, is so remote, there’s a national joke that it doesn’t exist. But for geochemist Foster Brown, it’s the center of the universe, a place that could help save the world.
“This is an example of hope,” he said, as we stood behind his office at the Federal University of Acre, a tropical campus carved into the Amazon rainforest. Brown placed his hand on a spindly trunk, ordering me to follow his lead. “There is a flow of water going up that stem, and there is a flow of sap coming down, and when it comes down it has carbon compounds,” he said. “Do you feel that?”
I couldn’t feel a thing. But that invisible process holds the key to a massive flow of cash into Brazil and an equally pivotal opportunity for countries trying to head off climate change without throwing their economies into turmoil. If the carbon in these trees could be quantified, then Acre could sell credits to polluters emitting clouds of CO₂. Whatever they release theoretically would be offset, or canceled out, by the rainforest.
Five thousand miles away in California, politicians, scientists, oil tycoons and tree huggers are bursting with excitement over the idea. The state is the second-largest carbon polluter in America, and its oil and gas industry emits about 50 million metric tons of CO₂ a year. What if Chevron or Shell or Phillips 66 could offset some of their damage by paying Brazil not to cut down trees?
The appetite is global. For the airline industry and industrialized nations in the Paris climate accord, offsets could be a cheap alternative to actually reducing fossil fuel use.
But the desperate hunger for these carbon credit plans appears to have blinded many of their advocates to the mounting pile of evidence that they haven’t — and won’t — deliver the climate benefit they promise."

To more fully appreciate the potential hole California is about to step into, read the closing paragraphs describing the Air Board's forthcoming action. And if you are further motivated to oppose these actions, energize your colleagues, friends, and organizations to contact your state legislator as well as Assembly Member Cristina Garcia, Chair of the Joint Legislative Committee on Climate Change Policies to oppose a proposed standard for allowing forest credits that the European Union hasn’t allowed in its cap-and-trade program “due to concerns about their environmental integrity.”.

Thursday, May 30, 2019

Market-based solutions for defeating a Green New Deal


Here is an update analyzing the subversive uses of market mechanisms by fossil fuel interests. As I wrote about in 2017, the petroleum majors have been exploring faux carbon taxes as a means of undercutting the most important part of California's suite of climate related laws, i.e., non-market mechanisms including restrictive regulatory laws. This tactic of using carbon taxes to dodge mounting litigation and laws fostering an expeditious transition away from fossil fuels is now evolving into a tactic to defeat similarly aggressive versions of a Green New Deal. This may well be a deal that D.C. moderates push to achieve in 2020.

Below is an excerpt from a posting on Naked Capitalism:

 “Big Oil Pushes Corporate-Friendly Carbon Tax in Attempt to Stem Green New Deal Wave” [LittleSis]. “With intensifying demands for bold climate action, the fossil fuel industry and its top allies are lining up behind a corporate-funded, market-centered carbon tax proposal, in an effort to stem the rising momentum around ideas like the Green New Deal and growing shareholder and investor concerns about the climate crisis. Oil and gas powerhouses BP and Shell recently announced that they were each contributing $1 million over the next two years to lobbying efforts for the Baker-Schultz Plan, which proposes an initial tax of $40-per-ton on carbon emissions…. Backed by top global corporate powerhouses, the plan is driven by an industry-friendly logic firmly within the bounds of the neoliberal imagination. For example, under the plan, revenue generated from the carbon tax would be returned back to “taxpayers,” rather than used by the government to oversee an accelerated transition to a system of renewable energy… 
Americans for Carbon Dividends

 (AFCD) is the U.S. lobbying arm for the Baker-Schultz Plan. AFCD appears to be entirely run by the lobbying firm Squire Patton Bogg and several of its top revolving door lobbyists. In addition to the fossil fuel industry ramping up its efforts to promote the Baker-Schultz plan, over a dozen major corporations and corporate-aligned environmental groups just announced a new group, the CEO Climate Dialogue, to promote ‘a market-based solution’ to the climate crisis.” 

Tuesday, May 28, 2019

The introduction to a paper we recently presented at the Western Political Science Association
meetings in San Diego....

Challenging the California Model for Climate Solutions


Cheri Lucas Jennings, Ph.D.
Bruce H. Jennings, Ph.D.


Abstract


Scientists around the world cite an accumulating body of evidence to urge the 
adoption of dramatic changes in policy to address a worsening climate crisis.
Identifying the precise policies to be pursued, however, is especially 
contentious. California environmental law, often used as a guide by others, is
once again serving as a model for shaping climate policies, including
discussions of a Green New Deal.


Many states are now seeking to implement one or another version of a 
specific California market-based approach to climate change: cap-and-trade. 
A closer examination of this emissions trading law raises serious questions 
regarding both this policy approach as well as the use of market mechanisms 
more generally. Manyof the state’s older, non-market policies for prohibiting 
inherently hazardous activities may provide a more compelling approach for 
addressing the principal sources of climate change; a threat perhaps better 
understood by a different appellation: fossil-fueled crises.


The choice of laws and policies adopted over the next decade may prove 
pivotal for addressing the existential threat posed by fossil fuels. California 
presents an instructive guide regarding the promise as well as treachery 
embedded in the distinctive approaches for addressing rapidly worsening 
global crises.







The Conflicts over Climate Solutions


On February 21, 2019 a youthful group of students made their way to U.S. Senator Dianne
Feinstein’s San Francisco office. Speaking in nervous and tentative tones, they presented
a simple, singular demand: “We want you to support the Green New Deal.”


For many of us familiar with world of politics, this scene is very much the bread and butter 
of office holders everywhere. Such meetings typically afford office holders the opportunity to
demonstrate their political acumen. Carefully listen, ask questions, nod appreciatively, and
thank guests for visiting. It is often a vital opportunity to measure what is going on in the world.


Instead, Senator Feinstein informed the students she had just been re-elected as their U.S. 
senator and they would do better listening to her. Among the many hundreds of thousands 
who subsequently viewed the video clip, her message appeared arrogantly stark: the public, 
not unlike these children, needs to think more carefully about their naive notion of a Green
New Deal and leave the serious decisions to experienced elected officials. As if to 
double-down on this public relations disaster, Senator Feinstein’s staff the very next day 
released a draft version of their more properly considered Green New Deal.


Senator Feinstein’s draft proposal is striking in terms of its simplicity. Whereas the Green New
Deal presented by Congress Member Alexandria Ocasio Cortez et al. identifies broad swaths
of policies ranging from public health and welfare, worker transitions and much more, 
Feinstein’s proposal draws on a mere handful of largely existing laws. And whereas the Green
New Deal demands dramatic reductions in greenhouse gas emissions by 2030, Feinstein calls
for reducing net greenhouse gas emissions no later than 2050.


Many of Ocasio Cortez’ detractors immediately seized upon the seemingly unwieldy
implications of her Green New Deal: vast expenditures creating yet another layer of
burdensome and intrusive regulatory programs. Feinstein’s proposal, by contrast, reflects 
a plan cast by a seasoned legislator: a pragmatic plan merging a handful of new initiatives 
matched with restoring a small group of existing law policies. A closer reading of each 
approach, however, reveals a much deeper divide between the two proposals with respect to
the primary mechanisms for transitioning the national economy away from fossil fuels.


Senator Feinstein’s proposal displays a very different framework for what measures should 
serve as solutions to a crisis threatening the survival of human civilization. Topping the 
Senator’s list of new initiatives is a program largely describing what many regard as
California’s most celebrated climate law: the Global Warming Solutions Act of 2006:


The United States shall reduce net greenhouse gas emissions to zero as soon as 
possible and by no later than 2050, including by:

Instituting a price on carbon that increases over time, impels the cooperation of
foreign nations, and uses revenues to defray household costs and spur new
zero-emission investments;


Dianne Feinstein’s proposal signals a much deeper conflict with the Green New Deal offered
by Ocasio Cortez and colleagues. Indeed, only a few short weeks before rebuffing her
young constituents, Senator Feinstein and her congressional colleagues received a letter
signed by over 600 groups demanding support for a Green New Deal. In addition to
endorsing specific provisions, the groups representing many millions of voters also rejected
failed policy instruments, including “...market-based mechanisms and technology options 
such as carbon and emissions trading and offsets, carbon capture and storage, nuclear 
power, waste-to-energy and biomass energy. Fossil fuel companies should pay their fair 
share for damages caused by climate change, rather than shifting those costs to taxpayers.”
Senator Feinstein’s seemingly innocuous provision for setting a price on carbon based on a
cooperative plan with foreign nations portends a much more contentious debate regarding
the role of citizens, the state, and markets.


The scene vividly displaying a group of young people challenging a powerful political figure
in her office calls forth many different interpretations. Youthful passions versus the sagacity
of the aged; the demand for immediate change versus a patience for incrementalism; casting
out the old and worn versus embracing items of enduring value. In the emerging 
Anthropocene new questions arise about our choices: Are the familiar tools and time-tested
policy approaches simply insufficient to address the fossil-fueled crises of the 21st century ?

Without giving away the lede to this story, 
young protesters around the globe may be on to something….