Waxman and Markey Attempt to Go Green, But Put Taxpayers in the Red
Global warming is waning as the topic de jour. Americans are focused on other priorities, especially when considering how much ‘being green’ will really cost. An April 2009 CBS News/New York Times poll showed that healthcare, education, and Social Security all took precedence over energy when the economy was excluded. Similarly, a March 2008 Gallup Poll found that “a majority of Americans say economic growth should be given the priority, even if the environment suffers to some extent.” In spite of popular opinion, the Obama administration has vowed to push its environmental agenda. Congress agreed, passing the largest budget in American history, which includes provisions for new climate change legislation.
On May 21, 2009, the House Energy and Commerce Committee passed the American Clean Energy and Security Act of 2009 (ACESA), which was co-sponsored by Committee Chairman Henry Waxman (D-Calif.) and Energy and the Environment Subcommittee Chairman Ed Markey (D-Mass.). Among other environmental regulations, the legislation calls for the implementation of a burdensome cap-and-trade system. This byzantine system proposes that the government grant tradable allowances for each ton of pollution emitted into the atmosphere to such entities as electric utilities, oil companies, and large industrial sources. The program decreases the number of available allowances issued each year to reduce greenhouse gas emissions based on 2005 levels by 3 percent in 2012, 17 percent in 2020, 42 percent in 2030, and 83 percent in 2050.
Among fiscal conservatives, cap-and-trade is becoming better known as cap-and-tax. Though cleverly disguised, cap-and-trade imposes a major tax on every domestic energy producer, which will inevitably be passed on to consumers. Perhaps not coincidentally, the big beneficiary of the Waxman-Markey is the federal government itself, which stands to rake in billions.
Studies show that cap-and-trade is doomed to fail on its own merits. The policies currently employed in the European Union (EU) Emissions Trading Scheme (ETS), which are comparable to those proposed under Waxman-Markey, are severely flawed. In Europe, emissions have not declined, but electricity rates have increased significantly and windfall profits have been realized by a number of companies through speculation and manipulation.
Even more disconcerting, the legislation will not meet its stated environmental goals. According to the 2009 Council of Economic Advisers’ Report to the President, global concentrations of carbon dioxide will be virtually unaffected by U.S. reductions unless developing countries participate. Without involving countries like India, China, and Pakistan, U.S. cap-and-trade efforts will be futile, weakening our competitive advantages and crippling the nation’s economy. How any lawmaker could see this as an advantageous initiative is truly an enigma.
Perhaps most laughable are the overzealous and unrealistic emissions reduction targets set by Reps. Waxman and Markey. According to Steven Hayward of the American Enterprise Institute, an 80 percent reduction in emissions in 2050 would entail turning back the per capita emissions output to levels not seen since 1875, when wood burning was the primary heat source. Additionally, climatologist Chip Knappenberger, who spent a decade at the Virginia State Climatology Office, has found that in the year 2050 with an 83 percent emissions reduction, the temperature reduction is only nine hundredths of one degree Fahrenheit, equivalent to just two years of avoided warming. Needless to say, that is not much bang for the buck.
Even though the Waxman-Markey bill passed out of committee with a 33-25 vote, behind-the-scenes negotiations are still taking place. Interestingly, opposition to this onerous bill does not fall strictly along party lines. Republicans find themselves standing shoulder-to-shoulder with Democrats from industrial states who are worried that cap-and-trade will put their constituents out of business.
In an effort to win over these Democrats, Reps. Waxman and Markey changed their original plan of auctioning off permits, and agreed to allocate the majority of these emissions permits free of charge. Four Energy and Commerce Committee Democrats, however, were not fooled by this ploy, and voted down the bill.
Anyone who has ever taken a basic economics class knows that the price of these permits is not the problem. The real issue lies in the tightening of carbon caps. As the number of available permits declines each year, so does the supply of carbon-based energy. As the supply falls relative to demand, energy prices will, according to President Obama, “necessarily skyrocket,” ultimately reducing economic output and employment. A Heritage Foundation study found that by 2035 the bill would reduce aggregate gross domestic product by $9.6 trillion, destroy over 1 million jobs, raise electricity rates by 90 percent, and increase an average family’s annual energy bill by $1,500.
As a more fiscally sustainable alternative to Waxman-Markey, Reps. Tom Price (R-Ga.) and Rob Bishop (R-Utah) recently introduced H.R. 2300, the American Energy Innovation Act. Rather than imposing new taxes on an already suffering economy, this legislation focuses on energy innovation, conservation, and production that will spur American ingenuity and foster market-based approaches to the nation’s energy needs. The Bishop-Price bill offers multiple policy solutions that would be far more effective than relying on a defective cap-and-trade scheme.
Reps. Waxman and Markey certainly have their work cut out for them. Defending their cap-and-trade scheme as superior to the dysfunctional EU ETS it mimics will be difficult. Persuading their coal-loving Democratic colleagues to risk re-election by ignoring the needs of their state’s businesses will also be a challenge. But if they can successfully pull the wool over taxpayers’ eyes and convince the American public to pay exorbitant taxes in exchange for essentially no environmental pay-off, they will have achieved one of the greatest political scams of all time.
— Erica Gordon
