Climate Consternation
Who likes cap-and-trade?
It’s not unusual to hear a legislator say a bill must be on the right track “because both sides think it’s a terrible idea.” Today’s lawmakers might want to consider the possibility of both sides being right.
And with legislation to regulate Earth’s climate, the phrase “both sides” grossly oversimplifies complex issues and multiple agendas—some obvious, some hidden—swirling like fall leaves in an early blizzard.
Oversimplification is not a word to describe the Waxman-Markey “cap-and-trade” bill. Known formally as H.R. 2454, it specifies the diminishing quantities of carbon dioxide emissions U.S. economic activity will be permitted in future years (the “cap”) in hopes of achieving ever-higher prices (the “trade”) to be paid by businesses, industries, and ultimately their customers for releasing CO2 through the middle of this century.
If you’ve sensed that H.R. 2454 is different from what you learned about in civics class, your instincts are good. Weighing in somewhere north of 1,400 pages, H.R. 2454 achieved its present bulk thanks to a 300-page amendment introduced at 3 a.m. the last Friday in June. By that evening it squeaked through the House of Representatives, mostly unread, on a 219–212 roll call. It’s been under attack from both sides—let’s say almost all sides—ever since.
Costs, Benefits Questioned
Slated for U.S. Senate passage this fall, H.R. 2454 has generated hostility among its expected critics but also among individuals a casual observer might expect to see supporting it.
Business groups accuse government of lowballing the cost estimates, citing evidence found in the government’s own documents. The surprise is environmental activists denouncing (their word, not ours) the bill’s trifling impact on greenhouse emissions.
When almost all sides think something is a terrible idea, they usually know why. In this case, those who have the most at stake come out the biggest losers. Environmentalists get nothing resembling the rapid CO2 cuts they’ve campaigned for. Consumers, business, and industry get giant increases in the cost of using electricity (meaning the cost of virtually everything), carefully delayed several years to help disguise the reason.
Who wins? Government, which after a discreet pause will begin raising hundreds of billions of dollars selling permission to emit carbon dioxide—and thus will have every incentive not to suppress emissions but to let them keep rising—and multinational corporations, courtesy of Congress mandating the purchase of things they sell.
In July, NASA scientist James Hansen, whose 1988 congressional testimony arguably launched the global-warming movement, wrote on the Huffington Post that Waxman-Markey is a “counterfeit climate bill” and a “monstrous absurdity.”
The bill “locks in fossil fuel business-as-usual and garlands it with a Ponzi-like ‘cap-and-trade’ scheme,” Hansen wrote, branding the measure “an astoundingly inefficient way to get a tiny reduction of emissions.”
Organizations including Greenpeace, Friends of the Earth, and Secure Green Future (SGF) were similarly critical. SGF called H.R. 2454 “a polluter-protection bill.”
Greenpeace labeled its 20-percent-by-2020 renewable energy quota “woefully insufficient,” and scorned its emission cuts of 17 percent below 2005 levels by 2020.
But the cost of even those cuts keeps cropping up.
In July, Investor’s Business Daily (IBD) editorialized that Waxman-Markey supporters claiming the bill would cost the average household “a postage stamp a day” relied on questionable arithmetic and knowing omissions of key economic data.
The underlying Congressional Budget Office (CBO) estimate looks only at 2020. It assumes a price of $28 per ton that year for emitting carbon dioxide. IBD says Waxman-Markey’s 2020 nationwide CO2 cap of five-plus billion tons yields a cost of $141 billion but the CBO cites a figure $50 billion lower.
The CBO itself admits it ignored higher energy prices shrinking gross domestic product. IBD quotes a footnote in the CBO report that says, “The resource cost does not include the potential decrease in gross domestic product (GDP) that could result from the cap.”
Using a Heritage Foundation estimate of $161 billion (2009 dollars) in GDP reduction by 2020, IBD calculates that year’s cost to a family of four at $1,870—more than 10 times the CBO estimate.
In August, the Energy Information Administration (EIA), part of the U.S. Department of Energy, said Waxman-Markey would reduce both industrial output and overall employment, even under a best-case scenario.
This “basic case” was defined as largely unimpeded expansion of nuclear generation and emission offsets more plentiful than needed to comply with lowering caps. Even assuming those advantages, the EIA forecast a decline in industrial shipments beginning in 2012 and reaching about 2.5 percent by 2030. It forecasts a decline in manufacturing jobs beginning in 2012 and exceeding 2 percent by 2030.
Rising energy prices drive this deterioration. In the EIA’s worst-case scenario, envisioning little or no success expanding nuclear and other low-emission technologies, industrial shipments drop 7 percent by 2030. No employment projection is offered for the worst case.
Big Business Bonanza
Clearly, many Americans believe it’s important to reduce carbon dioxide emissions. But they may be puzzled to find that among those deeply involved in shaping H.R. 2454 are companies all but synonymous with the biggest sources of those emissions.
The U.S. Climate Action Partnership (USCAP) says it’s asking the federal government “to quickly enact strong national legislation to require significant reductions of greenhouse gas emissions.”
USCAP members include BP America, the U.S. arm of the world’s biggest petroleum producer; Conoco Phillips and Shell; General Motors, Ford and Chrysler; General Electric; and “Big Electricity,” represented by Duke Energy, Exelon Corp., FPL Group, NRG Energy, and Pacific Gas and Electric.
Why would they form a group to lobby for CO2 restrictions?
There may be no single correct answer but indisputably, besides emitting or enabling greenhouse emissions, they sell things many see as remedies for greenhouse emissions, and lots more of those products will be sold—at premium prices—if Congress mandates they be bought.
Ironically, the May 30 edition of Canada’s National Post reported the origins of cap-and-trade for carbon dioxide lie with the bankrupt Houston energy-trading firm Enron.
In the first installment of a series titled “Climate Profiteers,” the Post tracked cap-and-trade for CO2 to an early-1990s Enron lobbying effort built on political contributions and Enron-funded analyses, “all geared to demonstrating a looming global catastrophe if carbon dioxide emissions weren’t curbed.”
A 1990s memo from Enron lobbyist and former Environmental Protection Agency official John Palmisano said the Kyoto Treaty “will do more to promote Enron’s business than will almost any other regulatory initiative outside of restructuring of the energy and natural-gas industries in Europe and the United States,” the Post reported.
Two Different Worlds
Days after House passage of Waxman-Markey, a Rasmussen poll found 56 percent of Americans rejecting higher taxes and utility bills to fight global warming. Sixty-three percent of respondents said creating jobs was more important than trying to stop global warming; 22 percent held the opposite view.
Of possibly greater long-term significance, the survey identified “a telling division” between Mainstream Americans and the Political Class, defined by Rasmussen as a small percentage whose answers to three polling questions indicate they trust political leaders more than the judgment of the public. Rasmussen found 67 percent of Mainstream Americans unwilling to pay higher taxes and utility costs. Only 17 percent of the Political Class shared that view.—Dave Hoopman
Dave Hoopman serves as director of regulatory affairs–electric for Cooperative Network.
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