In the News

“The program is in considerable debt and there is no way to get out of it. Instead of dealing with the debt and the structural deficit the program has, Congress keeps kicking the can down the road,” says Scott Holladay, an economics fellow the Institute for Policy Integrity at NYU Law School. He says the program is running a $19 billion deficit since 2005’s record hurricane season.

The EPA can and must proceed with new rules — but it must do so using market-based mechanisms that will not clash with possible future congressional actions.

The CLEAR Act would spur green energy investment while avoiding regional disparities, according to a new study by the Institute for Policy Integrity at New York University School of Law. The legislation would cap national greenhouse gas emissions, auctioning off all allowances for emissions and then refunding 75 percent of federal revenues to taxpayers, using the other 25 percent to invest in green technologies.

Indeed, as an April 2010 studyfrom the Institute for Policy Integrity at the New York University School of Law found, “It would take more than ten consecutive years without a single flood claim for the median premium payments to cover the deficit,” assuming the U.S. Treasury doesn’t charge the program interest on the debt. “Assuming median losses and a 5% interest on the program’s debt,” authors J. Scott Holladay and Jason A. Schwartz continue, “the repayment window rises to over 100 years. The program, as currently structured, will never repay its debt.”

The EPA can and must proceed with new rules—but it must do so using market-based mechanisms that will not clash with possible future congressional actions. It is bound by law to proceed, but it can move wisely by laying groundwork that will come at the lowest possible costs to business and will mesh well with the legislation Congress will hopefully enact someday soon.

But Scott Holladay, an economics fellow who works on climate issues for the Institute of Policy Integrity cautioned that while he agrees that meeting biomass demands will involve cutting down whole trees and lead to increased emissions, the numbers in the report should be taken with a grain of salt. “My main concern is this a very static look at the issue, it doesn’t take into account the feedback effect,” Holladay said. “It doesn’t seem like they take into account as forest becomes more scarce the price of wood will go up and the price of this as fuel will go up as well,” potentially prompting switches to other energy sources, he said.

Consider this a plan that allows the nation to set aside money in advance to pay for these disasters, instead of putting the burden on taxpayers. To cover those costs now, Congress allocates disaster relief money, or the federal government absorbs the cost some other way. For example, Katrina caused the National Flood Insurance Program to rack up $19 billion in debt. The program borrowed the money from the U.S. Treasury and has no plan to pay it back, according to the Institute for Policy Integrity at New York University Law School.

Sen. Lisa Murkowski’s EPA resolution, set for a 6 hour Senate showdown today, is really about the legitimacy of climate science, not the appropriate role for EPA in controlling greenhouse gases. The Senator argues that she wants the legislative branch to deal with the climate change issue instead of a federal agency. But the text of her one-sentence resolution disapproves of EPA’s scientific finding that greenhouse gases endanger public health and welfare.

In an April report titled “Flooding the Market,” the Institute for Policy Integrity concludes that the insured are getting a discount from federal taxpayers. Not only that, but the National Flood Insurance Program’s below-market rates combined with huge payouts in recent years has created a $19 billion debt. The Institute’s communications director notes that the debt is racking up $730 million in interest each year.

As the Senate prepares for the release of the Kerry-Graham-Lieberman climate bill, how would alternative approaches affect the economy? During today’s OnPoint, Michael Livermore, executive director of the Institute for Policy Integrity at New York University School of Law, discusses new research on the economic impacts of the Cantwell-Collins “CLEAR Act.” Livermore explains why the “CLEAR Act” will reduce emissions in an economically viable way and also compares it to other policy options.