Category Archives: Budget

Propping Up Coal at the Taxpayers’ Expense

W._Va._coal_mine_1908By Peter Galuszka

It’s always curious when big business and their bankrolled politicians complain about how the government and its regulations stymie the “magic of the free market.”

Then they turn around and keep protectionist policies that give certain industries big favors such as tax credits.

That’s what the General Assembly has done with a bill that would have reduced tax credits doled out to utilities that burn coal mined in Virginia. The original proposal backed by Gov. Terry McAuliffe was intended to help fill a $2.4 billion gap in the state’s biennial budget.

The idea quickly ran afoul of Dominion Virginia Power and the Virginia Coal & Energy Alliance. The original idea was to scale back tax credits but cap coal tax deductions at $500,000 in any given year. But after the utility and the coal industry lobbyists got involved, a bill to retain the tax credits was quickly approved setting caps at a more generous $7.5 million in a given year.

The credits stem from a law passed in 1999. Its purpose is to make it easier for big utilities like Dominion to choose thermal coal mined in Virginia over product mined elsewhere.

Coal production peaked in the state at 46 million tons. It’s now about 22 million tons or less. Coal employment has likewise dropped sharply over the years.

Much of the coal mined in Southwest Virginia is of high quality and some can be used either to generate electricity or make steel. The problem is its cost. Many of the seams in the state have played out and coal is increasingly thinner and is in  harder to reach areas. The cost of mining it has gone up.

For years coal maintained a price advantage over alternatives such as natural gas but thanks to hydraulic fracturing, that is no longer the case. Utilities like Dominion have been converted facilities to gas or are building new plants that use gas. Its last coal-related plant is a hybrid near St. Paul.

What’s causing this shift away from coal? High production costs and cheaper alternatives. Out West, in the Powder River Basin of Wyoming and Montana, coal is cheap and easy to mine. It does well. In other words, the free market is affecting  the declining Virginia coal industry  yet the General Assembly wants to prop it up at the expense of taxpayers and the budget.

By the way, Dominion and coal giant Alpha Natural Resources in Bristol are among the biggest political donors in the state.

Dominion Resources Is on a Tear

acl pipeline map By Peter Galuszka

Dominion Resources has been on a tear recently.

It’s been muscling through a dubious law in the General Assembly that would allow it to avoid State Corporation Commission rate audits for six years.

And, it has been throwing its weight around in less populated sections of the state. It is suing to force its way on the land of private property owners to survey its $5 billion Atlantic Coast Pipeline project that would take fracked natural gas from the Marcellus Shale formation in West Virginia and Pennsylvania on new routes to the southeast.

Property owners, particularly those in Nelson and Augusta Counties, are fighting in federal court in Harrisonburg.

What’s most interesting about this case is how the Commonwealth of Virginia, which swaddles itself in the ideals of the American Revolution of individual rights , somehow ignores the rights of small property owners when a big utility with deep pockets for political donations is involved. One wonders where all the conservatives are who were huffing and puffing over the Kelo case a few years back

And (bonus question) what do the two situations have in common? Republican State Sen. Frank Wagner of Virginia Beach, that’s who. He introduced the bill for Dominion to sidestep SCC oversight with the excuse that Dominion has deal with the impacts of a yet-to-be-finalized set of new federal carbon emission rules.

In 2004, Wagner also carried water for Dominion and other power companies by getting a law passed that would allow a “public service company” to survey private property without getting permission.

This is the basis of several hundred lawsuits Dominion has filed against small landowners. In the pipeline case, it will be interesting to see whether the natural gas is used for the common good of American customers or will end up being exported to foreign countries. Dominion insists it won’t,  but time will tell.

Another oddity is that Dominion is demanding access to survey a pipeline route when it hasn’t formally applied for  the project with the Federal Energy Energy Commission. Imagine if some private landowners showed up at the front door of Dominion’s downtown Richmond headquarters and demanded access to the building because they were thinking about building a natural gas pipeline? (Somebody call security!)

Here’s an opinion piece I wrote for this morning’s Washington Post.

The Strange Story of Health Diagnostic Laboratory

HDL's Mallory before her fall.

HDL’s Mallory before her fall.

By Peter Galuszka

The biggest problem facing the health care industry in Virginia and the rest of the country isn’t Obamacare or the lack of new medical discoveries. It the lack of transparency that hides what is really going on with pricing tests, drugs and hospital and doctors’ fees. Big Insurance and Big and Small Pharma cut secret deals. We are all affected.

I’ve been wanting to blog about this – especially after Jim Bacon’s recent post on the supposed tech trend in health care – but I wanted to wait until a story I’ve been working on for a few weeks was posted at Style Weekly, where I am a contributing editor.

In it, I explore the strange story of Health Diagnostic Laboratory, a famed Richmond start-up that went from zero to $383 million in revenues and 800 employees in a few short years. The firm said it was developing advanced bio-marker tests that could predict heart disease and diabetes long before they took root. HDL’s officials thought it would transform the $1.6 trillion health care industry.

Richmond’s business elite applauded HDL founder Tonya Mallory, a woman who grew up just north of the city and had the strong personality and drive to create the HDL behemoth. Badly wanting a high tech champion in a not-so high tech town, the city’s boosters did much to publicize HDL and Mallory, believing they could draw in more startups.

The story was too good to be true. It start to deflate last summer when the federal government noted that HDL was one of several testing labs being probed for paying doctors $17 for using HDL tests for Medicare patients when Medicare authorized $3 per test. Mallory resigned Dept. 23. Several lawsuits by Mallory’s former employer, Cigna health insurance and another have accused HDL of fraud. HDL has responded in court.

One legal picture suggests that HDL wasn’t a true tech startup but a new firm that stole intellectual property and sales staff. HDL says no, but its new leader Joe McConnell has taken steps to reform sales and marketing and is said to be working with the U.S. Department of Justice to settle a federal investigation.

The HDL affair raises issues about the inside marketing and apparent payoffs that are the biggest problem the health care industry faces. It doesn’t matter what kind of “market magic” combined with new technology comes up if something like this keeps happening.

This is all the more reason for a universal payer system. That may be “socialized” medicine but in my opinion it is the only logical way to go.

Medical Crush

surdak

Chris Surdak

by James A. Bacon

One day historians will look back upon the healthcare debate in the United States and marvel at how oblivious the politicians, lobbyists and pundits were to the massively disruptive changes to come. Congress battling over Obamacare and Virginia legislators grappling over Medicaid expansion will appear to future generations like so many dinosaurs hunting and munching and rutting, totally unaware that a meteor bearing down on them would bring them all to extinction.

In the view of futurist Chris Surdak, author of “Data Crush: How the Information Tidal Wave Is Driving New Business Opportunities,” the U.S. health care system is beyond reform. Massively entrenched special interests — physicians, hospitals, pharmaceutical companies, insurance companies, Medicare and Medicare recipients —  are deeply wedded to the status quo. “They are politically very powerful,” he tells Bacon’s Rebellion, “and rhetoric is all about self-preservation and self propagation. Who wants to see an unlicensed doctor? Who is against helping sick people?”

But that system is so dysfunctional and resistant to change that it will collapse as entirely new medical practice models emerge. Writing in HP Matter: The Healthcare Issue, Surdak identifies game-changing technologies that will give rise to new medical products and services that will deliver such better outcomes at less cost that they will render the old system obsolete.

New sensors are making it possible to track an ever-growing array of medical markers — temperature, pulse, blood pressure, glucose, cholesterol and virtually any kind of molecular compound — around the clock in real time, and then to transmit that data to central repositories where it can be subjected to predictive analytics. Soon, writes Surdak:

When you or I feel a bit sick it will be completely normal for us to stop by a vending machine at the mall, buy a disposable, $5 plastic cube (like today’s Square credit card reader), lick it, and then get an accurate diagnosis of our ailment in 10 seconds or less.  We’ll then get a coupon for the best treatment for that ailment and an invitation to consult with a five-star specialist in that condition, who practices medicine on a different continent. This will all be normal to us by 2020.

Existing health care providers will avail themselves of these technologies to make incremental improvements to the quality and cost of medical care, but they have no incentive to disrupt the system in which they are so heavily invested. Real change will come from entrepreneurs who build new business models around the technology. Healthcare incumbents can stifle domestic competition — although it is interesting to see how big players like drugstore chains are planning to disrupt the urgent care and diagnostics businesses — but they can’t quash competition from abroad.

Medical tourism, a large and growing industry, will explode, Surdak predicts. Instead of traveling outside the country for big-ticket procedures like open-heart surgery or kidney transplants, patients will consult with their doctors via FaceTime or Skype.

With telemedicine, it won’t matter where I live, or where my provider practices; we will simply log into a consultation session online. As a result, I will seek out the very best providers wherever they are in the world, and they in turn will work to market directly to me through online exchanges not unlike Angie’s List or eBay. This transformation is already taking place, and doctors who do not join such exchanges immediately will, again, find themselves providing commodity services to the least-common denominators in the market.

Traditionally, incumbent businesses have used their power to influence laws and regulations to protect themselves from competition. Change is moving so fast, however, that the politicians and regulators won’t be able to keep up, Surdak says. Much as Uber disrupts the transportation-for-hire industry by entering a market, developing a constituency and then asking for regulatory permission, the new wave of medical providers will develop powerful constituencies — new business ecosystems and, most importantly, happy patients — before the incumbents can shut them down.

If Surdak is right, and I think he might be, there will be a huge reshuffling of winners and losers. The biggest winners will be patients, who will get better medical treatment at lower cost, and the new wave of medical enterprises. The losers will be hospitals, insurers and physicians wedded to the status quo. If they don’t adapt, they will go extinct.

Insofar as state and federal governments pay for half the tab for the nation’s healthcare, governments will be big winners, too. The changes Surdak predicts could bend the medical cost curve radically downwards. Tens of trillions of dollars in future Medicare and Medicaid liabilities could evaporate. Boomergeddon will never arrive, and I’ll have to write a groveling apology.

I asked Surdak if there is anything that government can do to hasten medical disruption, especially at the state level. He suggested that we could get to work dismantling the barriers to change — professional licensure requirements, Certificate of Need regulation, mandated medical benefits — by which vested interests protect themselves. But from his Olympian perspective, he didn’t seem to think it really mattered. Disruption is coming regardless.

From a Virginia-centric perspective, I think it does matter. I draw an analogy with the deregulation of the banking industry in the 1980s. North Carolina got the jump on Virginia, enacting deregulation a couple of years before Virginia did. North Carolina banks started the process of consolidation and rationalization earlier than Virginia banks, eventually growing big enough to swallow the Virginia banks whole. Today, banking is a pillar of the North Carolina economy, not of Virginia’s. Similarly, if Virginia medical institutions are subjected to the full force of Surdakian disruption earlier than their peers in other states, they will have more time to adapt and innovate. They could emerge from the ashes stronger than before.

Will Virginians take up the challenge? I’m not optimistic. We don’t call ourselves the “Old” Dominion for nothing. But you never know. Medical miracles occasionally do happen.

Interview: McAuliffe’s Economic Goals

 maurice jonesBy Peter Galuszka

For a glimpse of where the administration of Gov. Terry McAuliffe is heading, here’s an interview I did with Maurice Jones, the secretary of commerce and trade that was published in Richmond’s Style Weekly.

Jones, a graduate of Hampden-Sydney College and University of Virginia law, is a former Rhodes Scholar who had been a deputy secretary of the U.S. Department of Housing and Urban Development under President Barack Obama. Before that, he was publisher of The Virginian-Pilot, which owns Style.

According to Jones, McAuliffe is big on jobs creation, corporate recruitment and upgrading education, especially at the community college and jobs-training levels. Virginia is doing poorly in economic growth, coming in recently at No. 48, ahead of only Maryland and the District of Columbia which, like Virginia have been hit hard by federal spending cuts.

Jones says he’s been traveling overseas a lot in his first year in office. Doing so helped land the $2 billion paper with Shandong Tranlin in Chesterfield County. The project, which will create 2,000 jobs, is the largest single investment by the Chinese in the U.S. McAuliffe also backs the highly controversial $5 billion Atlantic Coast Pipeline planned by Dominion because its natural gas should spawn badly-needed industrial growth in poor counties near the North Carolina border.

Read more, read here.

(Note: I have a new business blog going at Style Weekly called “The Deal.” Find it on Style’s webpage —   www.styleweekly.com)

Virginia’s Top Stories in 2014

mcd convictedBy Peter Galuszka

The Year 2014 was quite eventful if unsettling. It represented some major turning points for the Old Dominion.

Here are my picks for the top stories:

  • Robert F. McDonnell becomes the highest-ranking former or serving state official to be convicted of corruption. The six-week-long trial from July to September of the Republican former governor and his wife, Maureen, was international news. In terms of trash, it offered everything – greed, tackiness, a dysfunctional marriage, a relationship “triangle,” and an inner glimpse of how things work at the state capital.  More importantly, it ends forever the conceit that there is a “Virginia Way” in which politicians are gentlemen above reproach, the status quo prevails and ordinary voters should be kept as far away from the political process as possible. It also shows the unfinished job of reforming ethics. The hidden heroes are honest state bureaucrats who resisted top-down pushes to vet dubious vitamin pills plus the State Police who did their investigative duty.
  • Eric Cantor loses. Cantor, another Republican, had been riding high as the 7th District Congressman and House Majority Leader. A wunderkind of the Richmond business elite, Cantor was positioned to be House Speaker and was considered invulnerable, at least until David Brat, an unknown college economics professor and populist libertarian, exploited fractures in the state GOP to win a stunning primary upset. Cantor immediately landed in a high-paying lobbying job for a financial house.
  • Terry McAuliffe takes over. The Democrat Washington insider and Clinton crony beat hard-right fanatic Kenneth Cuccinelli in a tight 2013 race. He bet almost everything on getting the GOP-run General Assembly to expand Medicaid benefits to 400,000 low income Virginians. He lost and will try again. He’s done a pretty good job at snaring new business, notably the $2 billion Shandong-Tralin paper mill from China for Chesterfield County. It will employ 2,000.
  • Roads projects blow up. Leftover highway messes such as the bypass of U.S. 29 in Charlottesville finally got spiked for now. Big questions remain about what happened to the $400 million or so that the McDonnell Administration spent on the unwanted U.S. 460 road to nowhere in southeastern Virginia.
  • Gay marriage becomes legal. A U.S. District Judge in Norfolk found Virginia’s ban on gay marriage unconstitutional and the U.S. Supreme Court pushed opening gay marriage farther. The rulings helped turn the page on the state’s prejudicial past, such as the ban on interracial marriage that lasted until the late 1960s.
  • Fracking changes state energy picture. A flood of natural gas from West Virginia and Pennsylvania has utilities like Dominion Resources pushing gas projects. It’s been nixing coal plants and delaying new nukes and renewables. Dominion is also shaking things up by pitching a $5 billion, 550-mile-long pipeline through some of the state’s most picturesque areas – just one of several pipelines being pitched. The EPA has stirred things up with complex new rules in cutting carbon emissions and the state’s business community and their buddies at the State Corporation Commission have organized a massive opposition campaign. McAuliffe, meanwhile, has issued his “everything” energy plan that looks remarkably like former governor McDonnell’s.
  • State struggles with budget gaps. Sequestration of federal spending and defense cuts have sent officials scrambling to plug a $2.4 billion gap in the biennial budget. It is back to the same old smoke and mirrors to raise taxes while not seeming to. Obvious solutions – such as raising taxes on gasoline and tobacco – remain off limits.
  • College rape became a hot issue after Rolling Stone printed a flawed story about an alleged gang rape of a female student at the prestigious University of Virginia in 2012. Progressives pushed for raising awareness while conservatives took full advantage of the reporter’s reporting gaps to pretend that sex abuse is not really an issue.
  • Poverty is on the radar screen, especially in Richmond which has poverty rate of 27 percent (70 percent in some neighborhoods) and other spots such as Newport News. Richmond Mayor Dwight Jones got a lot of national press attention for his campaign to eradicate poverty but it is really hard to understand what he’s actually doing or whether it is successful. The real attention in Richmond is on such essentials as replacing the Diamond baseball stadium, justifying a training camp for the Washington Redskins and giving big subsidies for a rich San Diego brewer of craft beer.
  • Day care regulation. Virginia has a horrible reputation for allowing small, home day care centers to operate without regulation. Dozens have children have died over the past few years at them. This year there were deaths at centers in Midlothian and Lynchburg.
  • The continued madness of the Virginia Tobacco Indemnification and Community Revitalization Commission. This out-of-control slush fund in the tobacco belt continued its waywardness by talking with Democratic State Sen. Phil Pucket about a six-figure job just as Puckett was to resign and deny a swing vote in the senate in favor of expanding Medicaid. The commission also drew attention for inside plays by the politically powerful Kilgore family and giving $30 million in an unsolicited grant to utility Dominion.

Redistricting, Ethics Panel Pushes Ahead

seal_virginiaBy Peter Galuszka

Against strong chances that their efforts will be killed in the self-serving General Assembly, a panel is pushing ahead with badly needed reforms in government ethics and redistricting.

The bipartisan Commission on Integrity and Public Confidence in State Government wants to change the state constitution to create and independent redistricting commission tasked with remaking voting districts without regard to an election’s outcome.

Headed by Republican former Lt. Gov. Bill Bolling and Democrat former U.S. Rep. Rick Boucher, the group proposes that the redistricting commission be made up of five members. One each would be chosen by the House of Delegates speaker and minority leader and the same in the Senate. The four people would choose a fifth one and if they can’t decide, the state’s chief justice of the state Supreme Court would make the decision.

The idea is coming forward after two big events. One is the first-time ever conviction of a former or sitting governor in the state on corruption charges. The other was a federal court decision in October that the lines of the 3rd Congressional District were drawn in an unconstitutional way by packing in African-Americans. Doing so ensured victories by black politicians while diluted the black vote in neighboring ones.

The state constitution requires state and federal districts to be redrawn every 10 years to changes in settlement patterns. It has also been complicated by the Voting Rights Act, a 1960s-era vehicle that tried to correct the wrongs of white-dominated Southern states erecting districts so black votes were kept away.

At the moment very few of the races of other General Assembly are competitive. They are designed to keep incumbents in power which, in most rural districts, are Republicans. Thus, the real clash of ideas comes from a very tiny margin of voters and activists at Republican primaries that are often not representative of mainstream thinking.

Likewise, Virginia badly needs to address its “anything goes” policies regarding campaign donations and accepting gifts. This is a big reason why Robert F. McDonnell got into such big trouble with his corruption conviction that could put him in jail for a decade or more. Gov. Terry McAuliffe created the Bolling-Boucher commission just after McDonnell and his wife Maureen were convicted in a federal court in Richmond.

These reforms are absolutely necessary. If the General Assembly stubbornly deep-sixes the redistricting plan, someone else will have to come in. A federal judge has given the state until April 15 to redraw the 3rd district or the feds will do it.

And, as the McDonnell case shows, if Virginia goes over the top with ethics violations, the feds will do it, too. Underlining that point, the U.S. Probation Office is recommending double the usual prison time for McDonnell. Analysts say it is to make the statement crystal clear.

But, this is Virginia, unfortunately. Instead of dealing head-on with serious ethics problems, the ruling elite is mounting a campaign to give McDonnell time in community service instead of behind bars. Its proponents include the usual players like House Speaker Bill Howell and Tom Farrell of the utility Dominion.

Their game is to keep the status quo for as long as they can. Too bad times are changing, but the longer they stall, the more they hurt the people of Virginia.

Easy Savings: LED Street Lights

LED street lights in action -- China

LED street lights in action — China

by James A. Bacon

Installing LEDs  in street lights may be no panacea for municipal budget woes, but the payback is so high that one can’t help but wonder why every local government in Virginia isn’t doing it.

It’s heartening to heart that Virginia Beach, Virginia’s most populous city, is taking the plunge. Well, dipping its toe might be a more accurate description. According to the Virginian-Pilot, Highway Electric of Chesapeake will install about 180 LED street lights in the median of the newly expanded Princess Anne Road beginning January 5.

The main drawback of LEDs (light emitting diodes) is that they are more expensive than the high-pressure sodium lamps they replace: $6,600 compared to $4,800.  But fewer LEDs are needed to light Princess Anne Road — 182 compared to 257 of the sodium lamps —  so the total project cost is lower.

Moreover, maintenance and electricity costs are lower. An LED street lamp lasts five times longer than conventional lights. Over time, that saves the cost of buying new lights and the cost of sending crews to replace them. They also consume about half as much electricity as a sodium light. Virginia Beach spends about $5.4 million a year lighting all of its street lights, according to the Pilot. The city expects to be saving $650,000 annually within ten years by phasing in the LED lights.

Arlington County had converted 85% of its street lights to LEDs by August. But only a few Virginia localities have implemented the technology.

Bacon’s bottom line: The payback is so high that any citizens ought to get up in arms if their locality is failing to take advantage of this cost savings. But why not go a step further? Local governments can save even more by attaching sensors that detect the movement of cars and people. The lights turn on when someone is walking or driving nearby and turn off when no one’s around. As a bonus, burning less electricity reduces carbon dioxide emissions and power-plant pollution.

Admittedly, in Virginia the picture is complicated by the fact that Virginia Dominion Power owns many street lights. I’m not clear on how much say-so local governments have over how those lights are maintained. With that caveat, smart LED street lights is low hanging fruit that every local government should be plucking.

McAuliffe Goal: Take a Closer Look at Incentives

Governor Terry McAuliffe as salesman in chief

Governor Terry McAuliffe as salesman in chief

by James A. Bacon

Governor Terry McAuliffe’s great gift is salesmanship. He approaches the job of Virginia’s chief economic development officer with great enthusiasm, and he loves to wheel and deal. It’s not surprising, then, that his new strategic plan, “New Virginia Economy,” calls for an increase in the Governor’s Opportunity Fund to keep it “competitive with other states.” The fund is nearly depleted after the first year of the biennial budget, and the economic-development game won’t be much fun without more incentives to dangle.

The problems with incentives are well known. First, it is unknowable whether incentives actually induce a particular company to invest in Virginia, or whether the company simply takes the money because it is there for the taking. Second, there is an inherent unfairness in taxing existing citizens and businesses in order to shower benefits to newcomers.

What’s refreshing about the strategic plan is that it does recognize the need to scrutinize state incentive programs. In particular it proposes to prioritize the allocation of state dollars by conducting Return on Investment (ROI) analysis on different incentives and programs to see which yield the biggest bang for the buck. “New Virginia Economy” mentions three specific ideas:

Evaluate current policies and study the ROI on incentives and programs. The idea of setting up an “internal working group” to review performance is a good idea. All programs should be continually scrutinized by outsiders to see if they deliver value. I would argue that scarce public funds should be channeled to programs that yield the greatest ROI and poorly performing programs should be shut down.

The fact is, administrators of the programs themselves cannot rarely be trusted to give an honest evaluation. Bureaucrats have an instinct for self preservation. They want to maintain their programs — to grow them, if possible — and can be counted on to cherry pick evidence to justify continued funding. The best counter to this all-too-human tendency is to have outsiders  ask tough questions. Private companies have elaborate systems for allocating capital within their organizations with the goal of maximizing ROI. State government needs to create comparable processes for allocating public funds.

Enhance state research capacity for conducting ROI analysis. The strategic plan only hints at what the authors have in mind, but it seems self evident that it is impossible to conduct ROI analysis without data. In the realm of economic development, that means evaluating programs in light of the number of jobs created, how well those jobs pay, the level of capital investment, the impact on the state and local tax base and other basic data. A more sophisticated level of research would look for second-order effects. Would recruiting a new business to Virginia contribute to building a competitive and self-sustaining industry cluster? Would the company create contracting opportunities for other Virginia businesses? The list of questions is endless.

Reform the Tobacco Commission. The Tobacco Indemnification and Community Development Commission was founded with high hopes that it would revitalize the economies of Southside and Southwest Virginia, beset by the erosion of tobacco cultivation and the decimation of its mill-town manufacturing economy. The Commission has been criticized for a lack of oversight, which allows powerful politicians on the Commission to reward favored constituencies. The strategic plan calls for reforming the Commission to “maximize ROI on Commission investments” and to create a long-term sustainable funding model.

If we accept the premise that state government should dispense subsidies, tax breaks and other incentives to business — I personally don’t accept that premise, but the practice isn’t going to change any time soon — then we ought to ensure that the money is spent to the great public benefit.

Kudos: U.S.-China Climate Pact

Shanghai: Soot City

Shanghai: Soot City

By Peter Galuszka

President Barack Obama’s trailblazing pact with Chinese leader Xi Jinping to limit greenhouse gas emissions through 2025 is welcome news and could do much to reduce carbon dioxide emissions since the two countries are responsible for about 40 percent of the globe’s total.

China is an economic powerhouse so energy hungry it builds a new coal-fired generating plant about every eight to 10 days. Its leaders have pledged to cap  carbon emissions by 2030 or earlier.

Obama announced a plan to cut U.S. emissions by 26 to 28 percent below 2005 levels by 2025. This is a bigger cut than the 17 percent reduction by 2020 that he had announced earlier.

The agreement, reached in Beijing, is most welcome for the obvious reason that it would make a huge contribution to reducing greenhouse gases. It also undercuts the arguments by the fossil fuel industry, some utilities and their drum beaters that any steps the U.S. takes in cutting carbon pollution are pointless since China (or other Asian countries) will keep polluting anyway.

The arguments are crucial since Virginia’s Big Energy industry and the staff of the State Corporation Commission are attacking plans by the EPA to greatly reduce carbon.

Consider this gem of wisdom from another correspondent on this blog: “Virginia could revert to stone-age levels of zero greenhouse gas emissions tomorrow, and the savings would offset the increase in CO2 from coal-fired power plants built in India and China in a year! (OK, maybe not a year, but over a very short period of time.)”

Sadly, this kind of mentality is regressive and, with the new Washington-Beijing pact, is becoming increasingly irrelevant.

One thing many American commentators don’t seem to realize is that China isn’t necessarily a primitive business juggernaut stomping on any rational plan to check pollution. Beijing and Shanghai have some of the highest rates of air pollution in the world and its leadership, especially engineers and policy makers capable of understanding how technology can help them, knows they just can’t continue as before.

Three years ago, I visited both cities to research a book on the coal industry (newly out in an updated paperback, by the way, see below). I also went to Ulanbatour, the capital of coal-driven Mongolia where the air was so bad, I felt delirious within hours after arrival and by the next morning I showed signs of pulmonary illness.

The promise for changing things seems to money and the system.

In the U.S., we have a regulatory oversight apparatus over energy generation. This is reasonable because it prevents electric utilities from using their monopoly power to stick customers with high rates. But the system is flawed because: (1) it too often favors big utilities over average consumers and; (2) it is rigged to prevent new, experimental and possibly transformative technologies that very well could allow the use of dirty and dangerous but still cheap coal.

In the latter case, the thinking seems to be to go for ephemeral cost benefits (like using natural gas) without having any long-term strategy that actually might save lots more money through better health and more efficient, less-polluting energy.

In several cases, regulators nixed pilot plants that burn coal but use special new ways of doing so that capture a lot of carbon either in a chemical process involving ammonia or by stripping off the carbon emission from the pollution stream and sequestering them safely away. The plants cost big money. They are much cheaper to do as greenfield sites but regulators are more inclined to prevent them in favor with the soup d’jour of power that happens to be cheapest at the moment, in our current case, natural gas. Continue reading