Posts tagged ‘RI’

Is There a Zero-Cost Regulatory Solution to Energy Efficiency?

A while back, I criticized a story in the NY Times, as quoted by Kevin Drum, that said that California had among the lowest per capita electricity usage of any state (true) and that this was because of the intelligent regulation regime in the state (yes, but not the way they meant).  The implication of Drum's argument was that there was some sort of efficiency ideal that a smart group of technocrats could reach at limited cost to the state (false). Specifically, Drum argued:

Anyway, it's a good article, and goes to show the kinds of things we
could be doing nationwide if conservative politicians could put their
Chicken Little campaign contributors on hold for a few minutes and take
a look at how it's possible to cut energy use dramatically "” and reduce
our dependence on foreign suppliers "” without ruining the economy. The
energy industry might not like the idea, but the rest of us would.

My response, in part, was this:

Well, here are the eight states in the data set above that the
California CEC shows as having the lowest per capita electricity use:
CA, RI, NY, HI, NH, AK, VT, MA.  All right, now here are the eight
states from the same data set that have the highest electricity prices:  CA, RI, NY, HI, NH, AK, VT, MA.  Woah!  It's the exact same eight states!  The 8 states with the highest prices are the eight states with the lowest per capita consumption.
Unbelievable.  No way that could have an effect, huh?  It must be all
those green building codes in CA.  I suspect Drum is sort of right,
just not in the way he means.  Stupid regulation in each state drives
up prices, which in turn provides incentives for lower demand.  It
achieves the goal, I guess, but very inefficiently.  A straight tax
would be much more efficient.

As part of a presentation I am working on about global warming and proposed California CO2 abatement bill AB52, I had the occasion to do a bit more research.  All of my data is from the Energy Information Administration, whose page URLs keep changing and thus breaking my links but this index page to data seems to stay the same.

I found three factors that seem to be the main drivers of state electricity demand (which is measured in all of the charts below in thousands of kw-h per capita).  The first factor is climate, and certainly California has one of the milder climates.  The chart below looks at residential electricity demand vs. cooling degree days (weighted for population location).  Each data point is a state, with California is shown as the red data point:

We get something similar for heating degree days, with electrical use going down as the climate gets milder, though not as good of a fit, which is not surprising since electricity is less important to heating than cooling.  Since California is well below the line, mild climate can be said to explain some of its lead on other states, but not all.

So I looked next at the percentage of electricity demand that goes to industry.  More heavily industrialized states will have a higher total per capita demand, because heavy industry chews up electricity that other types of businesses do not.  It turns out that California has a relatively low industrial use, which is not surprising given the regulatory environment there and the degree to which industry has been chased out of the state (one would have to be a madman to, all things considered, set up a new factory in California).  So here is the same type of chart of total electrical per capita use by state vs. the % industrial demand, again with each data point a state and California in red:

Again there is a pretty strong relationship, and again we see some but not all of California's low per capita consumption explained.  In effect, states on the left have exported their high-electricity-use industries to the states on the right (or to other countries).

I have saved the most obvious relationship for last:  price.  It turns out unsurprisingly that the states with the highest electricity prices have the lowest per capital consumption:


Rolling climate, industrial intensity, and price together, these factors seem to explain at least 80% of California's efficiency lead over other states.  California government regulatory policy does indeed drive lower electrical consumption, just not exactly the way they would like you to think.  By chasing industries out of the state and raising electricity costs above those of almost every other state, California has reached a lower per capita consumption level.

Horrible Verdict

In what we may look back on as one of the worst and most destructive jury verdicts of the decade, three paint makers were found guilty of selling lead paint back when it was, well, legal:

A Rhode Island jury today found Sherwin-Williams Co. and two other
paintmakers guilty of creating a 'public nuisance' by manufacturing
lead paint after it was found to be dangerous." If upheld, the verdict
will force the companies to contribute millions toward abatement of
existing paint; a judge will also consider demands for punitive
damages. The ruling, the first of its kind, is also expected to
encourage the filing of more suits against the industry

As Walter Olson points out, the suit was dreamed up by veteran law firms from tobacco and asbestos lawsuits, using bits of both litigation models:

The verdict is an unfortunate confirmation that the "tobacco model" of
mass tort litigation remains alive and well. In particular,
contingency-fee private counsel have once again managed to 1) dream up
a novel idea for litigation based on the idea that some category of
public expenditure is really blameable on long-ago sales of a product;
2) sell the idea of suing to public officials who agree to front the
action, and who thus provide (along with advocacy groups) a suitably
public face for the lawsuit; and 3) manage to get liability attributed
retroactively to businesses whose actions decades ago were plainly
lawful under the standards of that time.

The firm Ness Motley who is RI's partner in this, is, surprise surprise, the largest single political donor in the state.

The WSJ($) has more thoughts today about why this verdict is so bad:

There are so many screwy aspects to this case that
it's hard to know where to begin. The jurors heard no evidence about an
injured party, nor were they informed of any specific house or building
that constituted the "nuisance." As for the defendants, Judge Michael
Silverstein instructed the jury that it wasn't necessary to find that
Sherwin-Williams, NL Industries and Millennium Holdings had actually
manufactured the paint present in Rhode Island or that they had even
sold it there.

Oh, and did we mention that at the time the companies
may or may not have sold lead paint in Rhode Island it was an entirely
lawful product? "The fact that the conduct that caused the nuisance is
lawful does not preclude liability," Judge Silverstein said. Lead paint
was banned for residential use in 1978.

So why is this such a big deal?  One only has to look at the situation in asbestos to see the potential ramifications.  The asbestos mess began, sensibly enough I guess, with lawyers suing makers and heavy users of asbestos products into bankruptcy for the benefit of people seriously ill (though one can argue that most of these cases belonged in the workers comp. system, but workers comp. doesn't allow those juicy punitive damage payments that pay the fuel bills for the lawyers' Gulfstream V's).  Eventually, the asbestos mass tort morphed into lawyers suing any company with deep pockets that had even heard of the word asbestos for the benefit of tens of thousands of people who had never been harmed but only claimed to have been present in the same zip code as asbestos. 

Here is the problem with the potential lead paint mass tort:  It has skipped right to the asbestos end-game, bypassing the "helping people who were seriously harmed" stage and jumping right to the settlements for billions without proof of any related injury.  And for all the ubiquity of asbestos, lead paint was even more prevalent in its day.  Will Sears be bankrupted for selling lead paint?  Will auto-makers and homebuilders be bankrupted for using it?   And, separately, will any of the settlement money that flows to states really go to lead paint abatement, or will most go to general revenue, as it did with tobacco?

OK, so its clear why those of use who care about stuff like property rights and individual responsibility might be appalled at this decision, but you progressive public policy types should be appalled as well.  If this thing gets rolling, the country will end up diverting hundreds of billions of dollars to a problem, mainly childhood lead poisoning, that while not solved has really been greatly reduced over the past few years.  Just to get a sense of scale, for example, we are talking about far more money potentially focused on lead paint than the total spent today publicly and privately on AIDS and cancer research combined.  Totally insane.