A Response to Dr. Ross McKitrick
Miss Eileen Norcross

The following remarks were given in at "God Is Great. Is God Green? A Conference on Evangelicals and the Environmental Task."  They are in response to Dr. Ross McKitrick's presentation, "Economic and Ethical Approaches to Environmental Protection"  The conference took place in Washington, DC on November 14, 2008.

Thank you. I enjoyed Dr. McKitrick’s paper very much, and I’d like to respond to three points he makes in his paper. The first is he begins with the discussion that humans are greater than nature. I agree we are endowed with intelligence, and with that intelligence comes a moral responsibility. It allows us to alter our environment, but also to study and understand it. We have not only a moral awareness concerning the protection of our environment—and I would argue the environmental movement has heightened that awareness, if not exaggerated it—we [also] have the curiosity and intellectual capacity to study and solve problems.

As earlier speakers have noted, humans are not a scourge on nature’s pristine canvas, but we are an intrinsic part of nature, and the only creature capable of protecting and enhancing the resources that nature provides. And I would argue that one alarming aspect of many environmental claims is that they reveal a disdain for scientific data and often economic analysis. I think there is irony in that, because the scientific method and economic analysis are really the fruits of the Enlightenment and scientific revolutions. Yet often you find in the environmental debate that these are discarded in favor of arguments that rest on moralizing and apocalyptic scenarios, which leads ultimately to the creation of policies in a panic state and the effects of policies which are not properly understood before they are implemented.

As Dr. McKitrick notes, for environmental policy to work it must be based on a true assessment of the problem and a careful assessment of cost and benefits of that policy. It must be based on science and evaluated in the context of economics and economic analysis. The expression “concern for the environment” is vague, as Dr. McKitrick notes, and it’s all-encompassing. Specificity is key. Often, what’s interesting is environmental claims deteriorate very quickly into attacks on consumerism, the market, corporations, and technology. Extreme claims often end up as extreme solutions. Right after Hurricane Katrina, people were linking Hurricane Katrina to global warming, as one example.

Reality-based policy means accurately assessing the problem that policymakers have identified. Creating policies, without proper understanding of the problem or proper assessment of the cost and benefits of the proposed solution, results in unintended consequences. It can also frustrate technological advance that might lead to improved environmental outcomes. There is an opportunity to reduce risk through innovation, and many environmental policies, I believe, dampen the discovery process by interfering in markets. They distort incentives and create constituencies, as Dr. McKitrick notes, who gain from the intervention.

And that leads me to the third point, and the point I enjoyed most in Dr. McKitrick’s paper, which concerns rent-seeking. Rent-seeking is a behavior which is intrinsic to almost all government intervention in markets. Where there is an opportunity for personal gain, strange coalitions form. Dr. McKitrick cites Bruce Yandle’s wonderful paper on Baptists and bootleggers, which I recommend everyone read.

A very good example of this is the ethanol lobby, in which you have the green movement and interestingly you have people who are hawkish on foreign policy and corporate farmers coming together in favor of the subsidy. I found a wonderful Washington Post article, dated from March, which begins: “What’s the closest thing in politics to religious experience? The ethanol conversion.” Recently, an example of this is Senator Clinton, who was against the ethanol subsidy in her Senate career in New York State. Ethanol is actually expanding; the corn forming is expanding from the Midwest into New York State, Texas, Arizona, and elsewhere as people chase the subsidy. Senator Clinton voted against the subsidy, yet when she went to the Iowa caucus, she became pro-ethanol. And other candidates have undergone similar experiences.

A little background on the ethanol subsidy that I think is interesting: It became a political cause after the Arab oil embargoes of the seventies. Voters had become concerned about U.S. dependence on foreign oil. In 1978 the energy tax bill was passed and it authorized an excise tax exemption for biofuels, chiefly gasohol.

The government does evaluate its policies, agencies do engage in evaluations and commission research to be done on the effects of their policies, but whether that information ever gets into the appropriate hands is another question. Whether it’s acted upon, I should say, by Congress. A 1986 USDA study showed that ethanol could not survive economically without deep subsidies, and that is how it survives today. Between 1995 and 2003, taxpayers have spent $73 billion on the ethanol subsidy. And these subsidies amount to about $1.05 to $1.38 per gallon of ethanol.

The ultimate effect—and there is a moral dimension here, I believe—is that it drives up corn prices, because the alternative uses of corn become more expensive. So about 14 percent of the U.S. corn crop in 2005 went to ethanol. That meant that prices for soft drinks, tortillas, and bacon went up as the price of hog feed increased. Now most of us might be able to absorb that in a higher grocery bill, but what that meant was that in Mexico tortilla prices rose by about 14 percent, which is a cost for the poor.

One study by Jerry Taylor shows, and it gets worse, that even if 100 percent of the U.S. corn crop [were] converted to ethanol, it would only displace 12 percent of our gasoline consumption. For ethanol to displace gasoline, we [would] need all U.S. crop land plus 20 percent more. The worst part of all is that after 20 years of research, scientists have discovered that it takes more energy to create ethanol than it actually gives. So it will do almost nothing to reduce our dependence on foreign oil. Last year we produced 8 billion gallons of ethanol and we consumed 134 billion gallons of gasoline.

So this is a case of policymakers picking a horse and continuing to back it in spite of the evidence, scientific and economic. And the reason for that is the corn lobby and politicians’ fear of it. Ethanol reduces carbon monoxide emissions, but cars get less gas mileage and ethanol may in fact increase other pollutants. Now by backing ethanol, the government has intervened into a market, not only providing a form of corporate welfare—and the people who are collecting the subsidy are generally the big corporate farmers—but it produces distortions in the market, which leads to distortions in discovery as farmers chase the corn subsidy.

I agree with Dr. McKitrick’s solution: If you want to reduce dependence on gas, and if you want to reduce carbon emissions, then tax the source. I thought that his proposal to tie it to the tropospheric temperature was a very good one. So in sum, what’s happening here is, as Dr. McKitrick notes in his paper, by backing one particular energy source—somewhat unadvisedly, and lacking scientific evidence—now you have a problem where you have a captive audience for the subsidy. And it’s very hard to take away. That will not lead to discovery and it will not lead to innovation, which is what the market provides.

Miss Eileen Norcross is a research fellow of the Government Accountability Project of the Mercatus Center at George Mason University.