COP29, Climate Groundhog Day

Shale fracking does more to reduce CO2 emissions than all the talk in Baku

WSJ editorial. 

"The United Nation’s COP29 climate summit in Baku, Azerbaijan, ended this weekend with a promise by wealthy countries to spend $300 billion a year by 2035 to help poorer ones adapt. Was this the ransom for letting high-flying emissaries escape on their private jets?

Like the movie “Groundhog Day,” each U.N.’s annual climate confab is a repeat of the last. Poor countries lambaste wealthier nations for their CO2 emissions. Wealthy countries self-flagellate and promise to atone by financing climate projects in developing countries. That sums up the blowout in Baku.

The U.S. and Europe are hailing the $300 billion deal for climate transfer payments. But like previous commitments, this one isn’t legally binding, and almost any international assistance counts toward the goal. As India’s emissary noted, it’s an “optical illusion.”

In 2009 wealthy countries pledged to spend $100 billion a year as penance for their climate sins. The Organization for Economic Cooperation and Development took a victory lap in 2022 when wealthy countries supposedly hit that goal, though general development projects backed by multilateral financing agencies accounted for much of the spending.

Poorer countries led by India tried to shame their wealthier counterparts into offering up $1.3 trillion in grants. But rich countries rightly balked at asking their taxpayers to finance climate largesse in low-income countries, especially when they are spending hefty sums trying to meet their own pointless emissions goals.

The West’s self-defeating climate policies have failed to reduce global emissions and may increase them by driving more manufacturing to China, India and other countries that rely heavily on coal. Global emissions are set to hit a new peak this year, though U.S. CO2 emissions are expected to decline 0.6% and Europe’s by 3.8%.

U.S. emissions are declining as cheap and abundant natural gas replaces coal in power production. America’s coal emissions are the lowest in more than 120 years. Increasing renewable production has reduced Europe’s emissions but also raised its energy prices and driven more manufacturing to China.

The reality is that U.S. shale fracking has done more to reduce emissions than the West’s climate mandates and subsidies. This may be why Biden climate envoy John Podesta said he expects U.S. emissions to continue to decline under Donald Trump. By accelerating U.S. liquefied natural gas export projects, Mr. Trump could also reduce global emissions.

But don’t expect this to stop the same climate movie from replaying next year."

Trump Betrays the Truckers With Chavez-DeRemer

His Labor nominee’s views on gig workers could cost thousands of jobs

WSJ editorial. 

"‘President Trump and I are going to fight for the truckers,” JD Vance declared at a Pennsylvania campaign rally this summer. Well, not so much. By tapping Oregon Rep. Lori Chavez-DeRemer as his Labor secretary, Mr. Trump has sold out the truckers to a Teamsters boss who didn’t endorse him for President.

The American Trucking Associations issued a statement Monday pointing out that Ms. Chavez-DeRemer’s “anti-trucking policies undermine our essential workforce, threaten the right of independent truckers to choose their own career path, and impede the efficiency of the supply chain.”

The group is referring to Ms. Chavez-DeRemer’s support for the anti-worker Pro Act, which seeks to reclassify tens of millions of independent contractors as employees who have less flexibility and autonomy. The National Labor Relations Act bars independent contractors from unionizing, so reclassifying them as employees would assist union organizing.

Teamsters bosses blame independent contracting for its declining membership, which is roughly half what it was 50 years ago. But the bigger culprit is the union’s costly bargaining demands, which have driven dozens of companies into bankruptcy.

Take Yellow Corp., once among the country’s largest trucking companies. As we detailed last year, Yellow sought financial concessions from the Teamsters to stay afloat. President Sean O’Brien refused and tweeted the image of a gravestone in a cemetery with “Yellow” on it. The company declared bankruptcy and some 30,000 workers lost their jobs.

The main priority of Mr. O’Brien and other union chiefs is compelling Americans to pay union dues whether they want to or not. So it’s strange that Mr. Trump would do their bidding by picking Ms. Chavez-DeRemer, who supports nationalizing California’s anti-worker and anti-business laws.

The Teamsters championed California’s AB5 law, which bars most independent contracting arrangements. A Mercatus Center study this year found the law led to a 4.4% decline in employment in occupations affected by it. Many truckers left the state. Some saw their pay decline because they lost performance bonuses. Less efficient trucking operations contributed to the pile-up of goods at southern California ports in 2021.

The Biden Labor Department this year finalized a rule that mirrors AB5. As Labor secretary, Ms. Chavez-DeRemer could decide the rule’s fate and dun truckers for allegedly misclassifying workers. Mr. Vance at the Pennsylvania rally claimed Kamala Harris knew little about the trucking business. Judging by his Labor pick, Mr. Trump doesn’t either."

Biden Tosses Rivian a $6 Billion Lifeline

The company is losing $107,043 per EV sale, and taxpayers could end up paying

WSJ editorial. 

"In this unfortunate era of industrial policy, it’s good to be a politically favored company no matter your commercial prospects. Consider the Biden Energy Department’s stunning $6 billion loan to struggling Rivian Automotive to make electric vehicles.

We had fun calling Rivian a “government unicorn” three years ago when it went public and surged to a fantastic $120 billion market valuation. Rivian at the time had sold a mere 156 vehicles despite being in business for 12 years. Its shares are now worth $11.8 billion.

Investors may have been betting on government subsidies supercharging Rivian’s growth, and they can’t blame the Biden Administration for not delivering. The Inflation Reduction Act includes a $7,500 tax credit per vehicle for EV buyers, plus a $40,000 credit for commercial EVs. The latter is a particular boon for Amazon, that corporate pauper, which owns shares representing 14.8% of Rivian’s voting power and has agreed to buy up to 100,000 of its delivery vans. The IRA also includes hefty subsidies for domestic battery production.

Despite these giant subsidies, Rivian lost about $4 billion on the 37,396 vehicles it has sold during the first nine months of this year. That’s $107,043 a vehicle. Ford loses only about $51,000 on each EV sold.

But unlike traditional auto makers, Rivian can’t use profits from gas-powered cars to subsidize EVs. Thus the company is rapidly burning through cash. It has suffered repeated assembly disruptions and had to recall vehicles to fix defects. It has $1.25 billion in debt due in 2026, so its current spending pace is problematic.

Enter the Biden DOE, which on Monday awarded Rivian the $6 billion loan to build a factory in Georgia with the capacity to make 400,000 SUVs and crossovers. This follows Illinois Gov. J.B. Pritzker’s pledge this spring of $827 million in state “incentives” for Rivian to expand production at an Illinois plant to 215,000 vehicles a year.

They believe in an EV field of dreams. But even if Rivian scales up and builds all these EVs, there’s no guarantee someone will buy them. Rivian’s sales fell in the last quarter, which it attributed in part to a “more challenging consumer environment.” It’s right about that. Traditional auto makers are having to slash prices to sell EVs to meet government mandates.

Rivian warns in its latest earnings statement that industry competition will intensify owing to government subsidies, new entrants, auto-maker discounts and a “regulatory push for alternative fuel vehicles.” Stellantis CEO Carlos Tavares says the industry is experiencing a “Darwinian period” in which only the financially fittest will survive.

Even Rivian seems to harbor doubts about its future. It warns that current and potential competitors have “significantly greater financial, technical, manufacturing, marketing, or other resources.”

The DOE loan program is supposed to help promising startups. But the Biden team is financing a struggling company with a known credit risk that is competing in a well-developed auto industry. Rivian’s debt maturing in 2026 carries an effective interest rate of 12%, but DOE is lending to it at the Treasury rate.

DOE says the loan is a “conditional commitment” that hinges on Rivian meeting “technical, legal, environmental, and financial conditions.” That means the Trump team may have the power to scrap it. GOP Georgia Gov. Brian Kemp has promoted Rivian’s planned factory in his state, but the loan will mainly benefit the company’s investors, especially Amazon.

The Rivian loan is an attempt to keep the company afloat at enormous taxpayer risk before the Trump Administration takes office. But if the loan goes bad in the next four years, don’t expect Biden officials to accept responsibility. They’ll blame the Trump crowd.

Energy secretary-designate Chris Wright has a big job ahead, and that includes cleaning up a Biden portfolio of corporate-welfare loans handed out for political reasons, not based on market principles or prospects."

Arizona Cities Will Pay a Price for Ignoring Homelessness

Residents can apply for property-tax refunds when officials refuse to enforce public-nuisance laws

By Victor Riches. He is president and CEO of the Goldwater Institute. Excerpts:

"City officials in Phoenix, Arizona’s largest city, have spent years shunting the homeless population into a downtown area that infamously became known as “the Zone.” The city reportedly instructed police officers to leave the Zone alone—not to enforce the law there. As a result it became one of the nation’s largest homeless encampments. For years it has been a chaotic den of panhandling, violent crime and destruction.

Property values plummeted in the Zone. Small businesses suffered. People lost their livelihoods as dozens of business owners had no choice but to close up shop. And even as the city spent over $180 million to address the crisis (only a fraction of which is publicly accounted for), the number of homeless people in Phoenix rose 92% between 2018 and 2023."

"In California . . . The refusal of district attorneys to prosecute crimes allowed lawbreakers to roam free, unhindered by the fear of punishment. Meanwhile, residents struggle under high taxes and crushing regulations. In fact, California has spent $24 billion on its homelessness crisis over the past five years only to see the homeless population increase by about 20%."

"Over the summer, the U.S. Supreme Court struck down what the Journal called a “judge-made right to vagrancy,” ruling in Grants Pass v. Johnson that it isn’t unconstitutional for cities to enforce laws against public camping. Cities across the country now have no excuse not to clean up their streets."

A Short Lesson in Drug Competition

Calling RFK Jr.: See the new treatment that will break a Pfizer monopoly on a drug for heart disease

WSJ editorial. 

"Whoever says the Food and Drug Administration is too cozy with Big Pharma isn’t paying attention to the bonanza of new treatments launched by biotech startups. Late last week the FDA approved BridgeBio’s novel medicine for progressive heart disease, which will challenge Pfizer’s market monopoly.

Drug makers are increasingly focused on developing medicines that treat subsets of diseases. One example is transthyretin amyloid cardiomyopathy, a form of heart failure caused by the liver producing misshaped proteins that form amyloid deposits that stiffen the heart muscle. The condition can result from aging or a genetic mutation that is present in 3.4% of African Americans.

Most patients don’t live more than 3.5 years after being diagnosed, though two Pfizer treatments approved in 2019 can extend life for years. BridgeBio’s Attruby may be even more effective. The twice a day pill regimen reduced the risk of death and recurrent cardiovascular hospitalizations by 42% after 30 months of treatment.

Unlike Pfizer’s treatments, Attruby almost completely fixes the defective protein. BridgeBio is also launching Attruby at a lower price. “We’re like the David versus these two massive Goliaths in this space,” CEO Neil Kumar told STAT News.

Another competing treatment by the small biotech firm Alnylam Pharmaceuticals based on a different technology is expected to be approved next spring. The stepped-up competition will almost certainly lower prices, even before Pfizer’s medicines lose patent protection in 2028.

We point all this out because a growing condominium on the political right and left supports government price controls based on the misguided notion that Big Pharma extracts monopoly rents. That includes RFK Jr., Donald Trump’s nominee to run Health and Human Services. But monopolies even on breakthrough drugs rarely last, patent protection expires after 20 years (much of which is taken up by the approval process), and profits are needed to fund research and development into new treatments—some of which may compete with blockbuster drugs.

To wit, Amgen on Tuesday announced its experimental obesity drug resulted in 20% weight loss over a year in a Phase 2 trial, more than Novo Nordisk’s Wegovy and roughly the same as Eli Lilly’s Zepbound. Despite the good news, Amgen’s stock price plunged 12% because Lilly’s next-generation experimental treatment has shown even larger benefits in trials.

A sure-fire way to reduce drug innovation and competition is to let the government dictate prices."

Recipe for a Regulatory Spring Cleaning

Idaho did it. Why can’t the federal government?

By James Broughel. 

"Despite bold promises from Elon Musk and Vivek Ramaswamy, skeptics doubt that the Department of Government Efficiency can deliver sweeping changes. The scope of federal regulation makes traditional reform efforts exercises in futility. But the sunset-review approach offers a solution.

Don’t ask agencies to identify every regulation they’d eliminate—a process that would take years and would get bogged down in bureaucratic procedures and legal challenges. Instead require them to justify the rules they’d keep. As things stand now, regulations will stay on the books unless someone acts to remove them, but a sunset rule would have them expire automatically unless agencies choose to keep them.

Starting on Inauguration Day, each federal agency should issue a sunset rule modeled after the Health and Human Services Department’s sunset rule from Donald Trump’s first term. These rules would insert expiration dates into all Code of Federal Regulations sections under an agency’s purview, with authority grounded in the periodic review provisions of the Regulatory Flexibility Act.

The first sunset deadline should be set about three years out—long enough for a thorough review but timed to avoid vulnerability to the Congressional Review Act, which can be used to overturn regulatory actions by a future administration. As the deadline approaches, agencies will choose what to retain through the re-codification process. Each agency would have to issue a final Federal Register notice, containing every regulation to be retained. Agency rules would continue to be subject to a sunset provision every 10 years.

Critics will claim this method is too aggressive or risks eliminating vital protections, but they misunderstand the process. Agencies retain authority to preserve necessary regulations—including those mandated by Congress. The difference is now they must make a case for doing so. Regulators will be forced to focus on keeping rules that deliver value. Deregulation sometimes requires that regulators admit mistakes, but a sunset provision means rules expire without having to point fingers or face criticism.

Idaho has proved deregulation is possible. The state repealed and revised its administrative rules code through a sunset review process in 2019. The results were dramatic. Since then, 95% of state regulations have been eliminated or simplified. The sky didn’t fall. Most regulations, when subject to genuine scrutiny, fail to justify their existence.

The federal government should learn from Idaho’s success. The result would be a regulatory system that is leaner, more efficient and responsive to 21st-century needs.

Mr. Broughel is a senior fellow with the Competitive Enterprise Institute."

Punishing Google for Its Search Success

The DOJ’s meddling in internet search engines could hurt consumers and help China

WSJ editorial. 

"How badly does the Biden Administration want to punish Google? So much that the Justice Department’s antitrust cops are now asking a federal court to hobble the search giant, even though their proposals would hurt consumers and could benefit China. That’s only the start of the reasons to be skeptical of this government market meddling.

In a court filing last week, the DOJ proposed a slew of remedies for Google’s alleged antitrust violations. Federal Judge Amit Mehta ruled in August that Google had maintained an illegal search-engine monopoly by paying web browsers and device manufacturers to be featured by default, even as he acknowledged this wasn’t the primary reason for its success.

“Google has not achieved market dominance by happenstance. It has hired thousands of highly skilled engineers, innovated consistently, and made shrewd business decisions,” Judge Mehta wrote. “The result is the industry’s highest quality search engine, which has earned Google the trust of hundreds of millions of daily users.”

No matter, the government now wants to degrade Google’s search-engine quality to help less successful rivals. Start with its proposal to require Google to divest its popular Chrome browser, which by default uses the company’s web search. DOJ says Chrome lets Google collect more data on users to better target ads and refine search results. Yet if advertisers and users benefit from this product integration, what’s the antitrust problem?

DOJ also wants to ban Google from paying to be featured as the default search engine elsewhere. Forget that the judge said Apple and others chose Google primarily because it “provides the best bet for monetizing queries.” Under their agreements with Google, they get a share of revenue. Prohibiting such deals would harm device manufacturers and other browsers.

The main beneficiary would be Microsoft’s Bing search engine, which could bid less for default placement. Note that Microsoft’s market capitalization is 50% larger than Google’s. To hamper one tech giant, DOJ would bolster a competing colossus. Ditto for the government’s plan to block Google from using artificial intelligence to improve its search engine. This would give a leg up to Microsoft’s Bing AI tool, as well as OpenAI, which is developing its own search tool.

DOJ even wants Google to socialize its data. The government’s filing proposes to force Google “to provide rivals and potential rivals both user-side and ads data for a period of ten years, at no cost, on a non-discriminatory basis.” Could this include foreign competitors, such as China’s Tencent or ByteDance? Don’t worry, DOJ’s filing suggests “proper privacy safeguards.”

The state Attorneys General who have joined the lawsuit also want to make Google fund a “nationwide advertising and education program” to encourage Americans to use other search engines, including with “short-term incentive payments.” Antitrust enforcers have clearly lost the plot when they want to force a company to pay customers to use an inferior competing product.

We’re reserving judgment on a separate antitrust suit against Google’s advertising practices. But consumer welfare has been the north star of antitrust law for four decades because it prevents regulators from remaking markets to reflect their own preferences. Even if the courts sign off on the DOJ’s plan, how well it would work is an open question, given that Google owes its dominance in large part to its innovation and engineering talent, as Judge Mehta noted.

All of this is taking place as the U.S. is in a high-stakes race with China for the lead in artificial intelligence. Google is an American leader in AI investment. Antitrust policy was designed to police genuine market abuses, not punish companies for success."

To Challenge China, India Needs to Get Out of the Way of Its Factory Owners

Trump’s promised tariffs on Chinese goods offer an opening for India but the travails of its garment industry are a cautionary tale

By Shan Li and Megha Mandavia of The WSJ. Excerpts:

"economists and manufacturers say that countries such as Bangladesh and Vietnam have also done a far better job of smoothing the way for firms than India where regulations, especially around labor, discourage companies from expanding.

Factories in India with over 100 employees require government permission to fire workers. Those with at least 50 female workers must set up an on-site nursery. Adding a second shift to turnaround large orders quickly also requires prior government approval."

"Bangladesh has streamlined its permitting process by handing over some regulatory powers to the country’s main trade group, the Bangladesh Garment Manufacturers and Exporters Association."

"Nearly 60% of Bangladesh factories have 3,000 workers or more, compared with an average of 150 workers per factory in India."

"It takes factories in Bangladesh two or three weeks to produce and ship an order, compared with twice as long in India"

"In the southern city of Bengaluru, A. Dhananjaya, who has run a garment manufacturing company for nearly three decades, says he grapples with high labor costs and hundreds of labor-compliance rules. He wouldn’t dare grow beyond about 100 workers, because that would mean more forms to fill out, more licenses to apply for, and more expenses."

"Economists and policymakers say it is a pattern that is repeated across many parts of India’s economy that have the best chance of employing lots of workers, from furniture to shoes."

"An overhaul of the labor code by Modi’s government aimed to loosen labor laws, including allowing firms of up to 300 to fire workers without government permission. But they have yet to be widely implemented after facing pushback from labor unions, which organized marches this year calling for the repeal of the laws.

Manufacturing firms in India said they are wary of operating large factories because of the power of organized labor."

"“No manufacturer wants to set up a 10,000 person factory because it really makes them a target,” said Rahul Ahluwalia, founding director of Foundation of Economic Development, a New Delhi think tank. “The politicians will round up your labor and try to extract rents from the businessmen through that.”

India’s failure to sign free-trade agreements with other countries that would slash tariffs on its exports has also made Indian garments increasingly too expensive for global retail companies. At the same time, the country levies high duties on the types of synthetic fabric that factories need to fill fast-fashion orders."