Welcome to Fraser Insight
A quarterly Fraser Institute review of public policy in America

The focus of this issue is something that affects all Americans, regardless of where they live or how they earn their living: energy.

Our In Context section features a Q&A on the Obama administration’s energy policy with Diane Katz, the Fraser Institute’s director of risk, environment, and energy. “In the throes of recession,” she warns, “the US cannot afford to further undermine economic growth by dramatically raising energy costs.”

Elsewhere in this issue, our In Print section offers essays discussing the low demand for hybrid cars, the importance of Canadian oil to the US economy, competition in the electricity industry, exploration in the Arctic, the resurgence of nuclear power in America, and the unintended consequences of ethanol policy. This edition of Fraser Insight also includes pieces on health care, trade, and the recent NATO summit.

Our In Focus section highlights recent Institute research into important policy issues. This issue features reports on the mining industry and on global warming.

We encourage you to add Fraseramerica.org—a storehouse of cogent commentaries and in-depth analysis—to your list of bookmarks. If you would like to share Insight with your friends and colleagues, invite them to sign up to receive our quarterly e-newsletter here. For back issues of Insight, please visit our newsletter archive page.

As always, we welcome your comments. Please e-mail us at insight@fraserinstitute.org.

In this issue of Fraser Insight

Counterfeit Medicines
by Philip Stevens and Julian Harris
Fraser Forum, May 2009

Counterfeit drugs have become a serious problem in the developing world. (Full article)

NATO at 60: One for All?
by Alan W. Dowd
Doublethink Online, April 1, 2009

If NATO’s leaders want to reform the alliance, they need look no further than the North Atlantic Treaty for inspiration. (Full article)

Centralizing America’s Health Care
by Mark Rovere
Fraser Forum, April 2009

The Obama administration is planning a massive re-ordering of the US health care system. (Full article)

The Rising Tide of Protectionism in the United States
by Alan W. Dowd
Fraser Forum, April 2009

A compromise shields existing trade agreements from protectionism—for now. (Full article)

ENERGY: Taking Action in the Arctic
by Alan W. Dowd and Alexander Moens
Fraser Forum, April 2009

Energy exploration, climate change, and Russia are forcing America and its allies to pay closer attention to the Arctic. (Full article)

ENERGY: Substantial Costs, Limited Results
by Diane Katz
Fraser Forum, April 2009

Automakers are banking on subsidies and tax credits to spur sales, but there has been little consumer interest in hybrid vehicles. (Full article)

The High Cost of Volunteering
by Alan W. Dowd
The American Magazine Online, March 31, 2009

We are approaching a time when volunteering will no longer be voluntary or gratis. (Full article)

ENERGY: The Cost of Obama’s Green Dreams
by Katrina Dunkley
Fraser Forum, March 2009

President Obama’s green jobs agenda will cost the taxpayer dearly in lost GDP, higher subsidization, and decreased productivity. (Full article)

ENERGY: Carbon Allowance Trading Expands in North America
by Gerry Angevine
Fraser Forum, March 2009

Differences in cap-and-trade rules across various jurisdictions are creating potential trade barriers. (Full article)



ENERGY: Increasing Choice in Electricity Markets
by Gerry Angevine
Fraser Forum, March 2009

Competition in electricity service yields benefits for consumers. (Full article)

Setting a Bad Example
by Nadeem Esmail
Fraser Forum, March 2009

President Obama appears eager to make the government the main provider of health insurance. Canada’s struggles with single-payer health insurance should give him pause. (Full article)

ENERGY: The Post-Petro Economy
by Alan W. Dowd
The American Legion Magazine, March 2009

The US nuclear power industry is remarkably small for a country with the energy needs of the United States. (Full article)

ENERGY: Corn-Fed Fuel
by Alan W. Dowd
The American Legion Magazine, March 2009

By inducing farmers to grow corn for ethanol and mandating energy suppliers to produce ethanol, Washington has created a case study in the Law of Unintended Consequences. (Full article)

ENERGY: President Obama: You Need Canuck Oil
by Diane Katz and Gerry Angevine
The Halifax Chronicle-Herald, February 19, 2009

Why would Washington want to shut the Canadian oil spigot? (Full article)

Survey of Mining Companies: 2008/2009
by Fred McMahon and Miguel Cervantes

According the Institute’s survey, most US jurisdictions are becoming less attractive destinations for investment, while only four states improved their standing with miners. (Full report)

Critical Topics in Global Warming
edited by Ross McKitrick

Proponents of a sweeping regulatory response to climate change insist that the scientific debate has long been settled. But a fair reading of the science proves otherwise. (Full report)

Energy policy in the United States
A Q&A with Diane Katz, Director of Risk, Environment, and Energy Policy

Insight: Could you explain how a cap-and-trade system works and what its likely consequences would be for America’s economy?

Diane Katz: Under a cap-and-trade program, the government sets an overall limit (cap) on emissions. Based on that cap, quotas are imposed on individual sources of emissions, such as utilities and factories. The government allocates “allowances” to each facility representing the volume of their quota. A facility must either reduce emissions to meet the quota or purchase allowances from those that have exceeded their required reductions (trade). At its core, this regulatory regime is based on the creation of a scarcity by government fiat (the cap on CO2 emissions) and the rationing of the remaining supply through government-imposed quotas. The cost of compliance constitutes a tax by raising the cost of carbon-based fuels to curtail use. The precise levels at which the overall cap and the quotas ultimately are set are arbitrary. That leaves politicians and lobbyists for all sorts of special interests to haggle over the quotas. And that makes cap and trade a political mechanism, not a market mechanism.

The costs imposed by the cap-and-trade system would likely reduce the amount of investment in plants, machinery, and new technologies—and would largely fall on consumers. As President Obama told the San Francisco Examiner, “Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.”


Insight: The largest portion of America’s oil supply comes from here in the US, and the second-largest supplier is Canada. Could you discuss the importance of strengthening the long-term viability of these North American sources of petroleum?

Diane Katz: Market forces, not geography, should determine what the most efficient supplies of energy are. That said, North American petroleum products do represent a supply that is shielded from the risk of disruption by foreign conflicts, piracy, and the whims of OPEC. There are economic benefits to the North American integration of electricity transmission networks and pipelines. Trade in petroleum and other energy products also helps grow the continental economy. And to the extent the Canadian oil industry grows from US trade, the nearly 500,000 workers whose jobs are related to energy will be able to buy more US goods.


Insight: The press has called President Obama’s environmental and energy advisors a “green dream team.” How could their plans turn out to be a nightmare for American consumers and industry?

Diane Katz: Republicans and Democrats alike have long recognized the necessity of affordable energy to economic growth. US energy policy has, therefore, focused on securing reliable supplies of fossil fuels. In contrast, President Obama is placing the nation’s energy and environmental policy in the hands of three career bureaucrats and one biofuels researcher, all of whom are committed to punishing the petroleum industry with higher taxes and costly regulations. In the throes of recession, the US cannot afford to further undermine economic growth by dramatically raising energy costs.

Alan Dowd is a Senior Fellow of the Fraser Institute, conducting research into defense and security, and the Senior Editor of Fraseramerica.org. You can peruse his writing here. Contact him at (317) 578-0061 or alan.dowd@fraserinstitute.org.

Diane Katz is the Director of Risk, Environment, and Energy Policy at the Fraser Institute. You can read her commentaries here. Contact her at (313) 378-6986 or diane.katz@fraserinstitute.org.

To access past issues of Fraser Insight, visit our archives. We welcome your questions and comments at insight@fraserinstitute.org.

Fraser Institute

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