Big Economics and New EPA CO2 Rules

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Dr. Peter Gleick of the  Fakegate episode1 postulates that due to the ever rising US GDP2, the impact of the recent US EPA carbon emissions regulations3 will hardly be seen economically. Or, rather, show a continued and perhaps even better situation.

Sure hope so.  His (and the EPA’s) reasoning4 is that by graphics it would appear that GDP was positively influenced by environmental regulations resulting from the clean air act5.  One has to agree that the air quality in Pittsburgh is much better, and the Cuyahoga River6 likely won’t catch fire again very soon.

But, as usual, there are other ways of looking at economic data on such a huge system as that of the US7 (Figure 1).  This is important since the easiest low hanging fruit has been picked from the environmental no-no tableau.

Figure 1. The US world economic position by stock market capitalization. Source:

Sierra Rayne8 takes Dr. Gleick’s GDP reasoning a step further considering the same regulatory data points and what could have been9.  While that is also prognostication, it is worth considering as to what we might have attained under less rigorous rules.

One of the continuing comments is that the cleanup of the US drove jobs and manufacturing overseas.  This resulted in merely shifting the ‘dirtiness’ to less fortunate but economically hungry off-shore nation-states.  Commonly shown evidence supports this and is not readily seen in the US GDP.

This off-shore movement can be seen in our balance of trade.  From a nationalist point of view and what was true for most of the 20th century, it was a desirable positive.  More wealth moved into the US than outward.  But, since the advent of the EPA, with a bit of business reaction/response latency, the balance of trade10 is going the other way (Figure 2).  If it weren’t for the huge US capitalization and economic engine, the GDP might be even more different.9  Due to what appears as a continuous trade deficit trend, the fragile US economy might not overcome the latest and most difficult requirements of the EPA related to CO2 emissions.  Note that the  annual -5% is equal to USD 900 Billion or almost a USD 1 Trillion leaving the country.

US Annual Trade Deficit and US Environmental Actions

US Annual Trade Deficit and EPA Actions

Predictions are not always the end result.  Many are using Germany as an example of environmental success with wind and solar.   Their initiative is now showing electrical costs of USD 400/MWhr11 vs US average of USD 150/MWhr12.  It is conceivable that the US could experience similar increases.   We have already seen increases related to mandated implementations of wind and solar. In addition, the June 2014 IEEE Spectrum13 notes that grid instability could become a norm if the German experiment is repeated here.  Since the economy is not showing adequate job growth, what could the loss in low cost energy do to struggling citizens?

All three presentations2, 9, 10 are observational correlations.  So too is the 95% correlation14 between the increase in shellfish consumption and rise in atmospheric CO2.  Which caused the other?  The take home is that correlation does not necessarily show causation.  Climatologists and GIGO* modelers are still arguing about feedback sensitivity.15, 16.  Such debate brings up concern about whether there is any need to reduce CO2 emissions.

Will CO2 reduction as posed be a good thing?  Let’s hope so, but it could easily backfire and waste a lot of energy and resources.
* GIGO – Garbage In, Garbage Out
2”>due to the ever rising US GD
5 ibid.

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