by Richard Belzer

in Peer Review, Regulatory Science

Last week, unknown hackers broke into the computer at the University of East Anglia's (UK) Climate Research Unit, downloaded a trove of emails and other documents, then posted them on the web for all to see.

13 Nov 2009

Smart Electric Meters:
Are the data inaccurate or just ugly?

by Richard Belzer

in Information Quality, Regulatory Economics

California is at the vanguard of pricing electricity by the time of day it is used. The reason is that it costs more to produce (or buy) electricity at peak times. By charging prices linked to marginal cost, electricity consumers can be motivated to use power when it is less expensive.

The movement toward marginal cost pricing is encountering opposition.

11 Jul 2009

What's Suddenly Gone Wrong with the Oil Market? Part 2:
Reaction to the Brown-Sarkozy proposal

by Richard Belzer

in Regulatory Economics, Regulatory Policy

Earlier this week, UK Prime Minister Gordon Brown and French President Nicolas Sarkozy proposed the establishment of a global regulatory regime to "stabilize" oil prices. We deconstructed the proposal to show that the Brown-Sarkozy proposal seemed to be aimed at keeping oil prices high, not necessarily stabilizing them:

The potential scope and scale of this proposed "government supervision" appear to be quite large. Brown and Sarkozy are seeking a global regulatory regime that would "reduce damaging speculation" and "serve the interests of orderly and adequate investment in future supplies." The commentary provides no insight concerning what social benefits are obtained by "orderliness," or how much speculation is "damaging." Indeed, Brown and Sarkozy follow a well worn path by criticizing "speculators" for driving prices up (or, in this case, down). Every futures contract has both a willing buyer and a willing seller.

Futures markets serve an important public purpose--they provide price discovery--and, ironically for Brown and Sarkozy's argument, they tend to reduce price volatility. Regulatory restrictions on speculation should be expected to increase uncertainty, and thus exacerbate volatility. But as an analysis of the Brown-Sarkozy commentary shows, price volatility is not the problem they are actually worried about. They are trying to figure out how to use regulation to keep prices high and make it seem as if this is a good thing for consumers.

Early reactions to the proposal suggest it has a long way to go to be persuasive.

10 Jul 2009

Conflating Risk Assessment and Risk Management:
The G-8 Communique on climate change

by Richard Belzer

in Regulatory Policy, Regulatory Science

The summer G8 meeting is over, and the press is reporting that leaders were unable to reach agreement on climate change. For example:

• Reuters: "G8 leaders failed to persuade India and China to join a push to cut greenhouse emissions by 50 percent by 2050," and "a G8 deal to reduce its greenhouse gas emission by 80 percent by 2050 was thrown into doubt within hours of being announced."
• Wall Street Journal: "The world's richest and its largest developing economies made a little progress in bridging the gaps that divide them Thursday, agreeing on the ultimate goal for climate change negotiations, and a relaunch of stop-start trade talks that have dragged on for eight years."
• New York Times: "The world’s biggest developing nations, led by China and India, refused Wednesday to commit to specific goals for slashing heat-trapping gases by 2050, undercutting the drive to build a global consensus by the end of this year to reverse the threat of climate change."

However, the G8 leaders were able to reach an agreement that scientists are in charge of climate change policy-making and that the benefits of mitigation far outweigh the costs.

9 Jul 2009

Cap and Trade, Part 4:
The importance of serendipity

by Richard Belzer

in Legislation, Regulatory Policy

Major changes in the regulatory landscape often require serendipitous, attention-grabbing events to push them over the top. These events must be perceived to be related to the cause at hand, but no actual scientific relationship needs to exist. What matters is perception.

Right now, it seems highly unlikely that such an event will occur this year to push cap and trade over the top.

8 Jul 2009

What's Suddenly Gone Wrong with the Oil Market?
Market failure or something else?

by Richard Belzer

in Regulatory Economics, Regulatory Policy

In the last day or so there has appeared in the news a sudden interest in regulating the global market for crude oil. This is almost certainly the unveiling of a coordinated plan.

What's behind it?

7 Jul 2009

Cap and Trade, Part 3:
Waxman-Markey moves to the Senate

by Richard Belzer

in Legislation, Regulatory Policy

The Obama Administration's "cap and trade" bill to regulate greenhouse gas emissions (HR 2454, Waxman-Markey) has moved to the Senate, where the leadership hopes to have a bill ready to bring to the floor by September. The Washington Post reports that the bill is 15 to 20 votes short.

28 Jun 2009

Cap and Trade, Part 2:
Waxman-Markey passes the House

by Richard Belzer

in Legislation, Regulatory Policy

HR 2454 (Waxman-Markey) passed the House Friday night 219-212. The mostly party-line vote has interesting details.

27 Jun 2009

Cap and Trade, Part 1:
Compensating tariffs or trade war?

by Richard Belzer

in Legislation, Regulatory Economics

The House leadership plans to amend Waxman-Markey to impose trade sanctions on countries that do not reduce greenhouse gas emissions. International adherence to effective restrictions is essential for the bill to have any effect on global emissions. However, trade sanctions would have the effect of significantly reducing international trade and protect energy-sensitive US industries and their workers from foreign competition. This amendment would compel other nations (chiefly China) to adhere to US emission standards if they want to continue exporting to the US. These nations likely would interpret such demands as trade restrictions impermissible under existing WTO agreements.

25 Feb 2009

Regulatory Review in the Obama Administration, Part 3:
Cass Sunstein and his critics

by Richard Belzer

in People & Institutions, Regulatory Policy

Long time University of Chicago Law (and recent Harvard Law) professor Cass Sunstein is expected to be nominated by President Obama to be the new Administrator of the Office of Information and Regulatory Affairs. OIRA is the statutory office within the White House Office of Management and Budget that, among other things, has conducted centralized regulatory oversight on behalf of the president since 1981.

When Susan Dudley was nominated in 2006 to head this office, Neutral Source published an eight-part analysis of her "paper trail," which is summarized here. We undertook this task because her nomination generated controversy from certain activist groups, most notably Public Citizen, and we found significant factual discrepancies between the actual content of this paper trail and her critics claims about it.

We intend to repeat this effort, but Sunstein presents an unusually difficult challenge.

24 Feb 2009

Regulatory Review in the Obama Administration, Part 2:
Alive and well, reports to the contrary notwithstanding

by Richard Belzer

in Regulatory Policy

In a February 17 article, Politico reporter Josh Gerstein claims that "[i]n his first weeks in office, President Barack Obama shut down his predecessor’s system for reviewing regulations" and "managed to take all these actions with nary a mention from the White House press corps." Gerstein further claims that this "escaped notice because they were never announced by the White House Press Office and were never placed on the White House web site."

Gerstein's reporting is erroneous.

3 Feb 2009

Regulatory Review in the Obama Administration, Part 1:
Executive Order 13497

by Richard Belzer

in Regulatory Policy

On January 30, President Obama signed Executive Order 13497, which begins the process of changing the way the Office of Management and Budgwet performs centralized review of draft proposed and draft final regulations. In a memorandum to agency heads, the President also announced a plan to produce "a set of recommendations" within 100 days (~ May 14, 2009).

Texts for both documents are provided below.

15 Jan 2009

Greenhouse Gases and the Clean Air Act:
An update

by Richard Belzer

in Regulatory Economics, Regulatory Policy, Welcome

On July 15, 2008, we published a post concerning the Environmental Protection Agency's advance notice of proposed rulemaking (ANPRM) concerning whether greenhouse gas emissions warranted regulation under the Clean Air Act. At the time, it was widely thought that this single regulatory action could be the largest in U.S. history, with annual effects on the economy of roughly $100 billion per year. We had planned to run a series of posts on the issues presented in this ANPRM.

We were overtaken by events. Not only do the ANPRM and its supporting documents run to thousands of pages, but the number of items in the public docket now exceeds 2,500, not including public comment mass mailings. However desirable it might be as a public service to sift through this information, it is beyond our current funding capabilities to complete.

Meanwhile, a truly unexpected event happened shortly after the ANPRM was published. The world financial panic that erupted in September is so much greater in scope and scale that this ANPRM suddenly looks small.

Neutral Source is revising its priorities for 2009 given these extraordinary events. Please be patient.

1 Jan 2009

Gasoline Taxes:
Charles Krauthammer's 'net-zero' proposal

by Richard Belzer

in Regulatory Economics

Syndicated columnist Charles Krauthammer has endorsed a gax tax as a tool for reducing U.S. demand for petroleum, and thus the world price. He is "agnostic" about the threat posed by anthropogenic global climate, but hardly so with respect to the perils of transferring great wealth to regimes that are opponents or sworn enemies.

Krauthammer insists that such a gas tax be a "net zero" tax, by which he means revenue neutral. Revenue collected by the tax would be matched by reductions in payroll taxes.

Here are some challenging issues in political economy that Krauthammer does not address, but which much be resolved for a proposal such as his to succeed.