The International Monetary Fund (IMF) is attempting to do what couldn’t be done at the international climate change conference in Copenhagen last December: Transfer large sums of wealth from developed countries to developing ones in the name of climate change. From BusinessWeek:
Dominique Strauss-Kahn, head of the International Monetary Fund, said the organization is helping to set up a “green fund” that would raise $100 billion a year by 2020 to mitigate the effects of climate change in developing countries.
Strauss-Kahn indicated the fund may use its quotas, which reflect member countries’ financial capacity and obligations within the IMF, to raise initial funding. The IMF would not manage the money raised, he said. Last year, an increase in quotas allowed the institution to boost global liquidity by more than $250 billion at the request of the Group of 20 leaders.”
There are prudent ways to help developing countries protect against natural disasters but more foreign aid isn’t one of them. Heritage Senior Policy Analyst Ben Lieberman, who witnessed many of the developing countries’ pleas for handouts, lists several problems with foreign aid: “In many cases only a fraction of the funds were well spent, and aid can encourage the perpetuation of the very reasons (and regimes) that gave rise to the need for assistance in the first place. Foreign aid doled out to fight global warming has another big drawback – the problem it addresses is an overstated one.”
More economic freedom will allow developing countries to actually develop and build houses and buildings more resistant to natural disasters. Take the recent tragic setbacks in Haiti and Chile, for instance. In the 2010 Heritage Index of Economic Freedom, Chile ranks 10th and is categorized as “mostly free.” Haiti ranks in the “mostly unfree” category at 141st. Income per capita is much higher in Chile and its citizens can afford soundly-constructed infrastructure. Although the earthquake that hit Chilean land was stronger than that of Haiti’s, there was far less casualties and structural damage because “Chileans, on the other hand, have homes and offices built to ride out quakes, their steel skeletons designed to sway with seismic waves rather than resist them.”
Instead of establishing green funds, we should be working to open up markets to help countries improve both their economy and their environment. “Engaging in freer trade is a fundamental part of a strategy to better promote the evolution of sensible environmental regulations by empowering countries with the economic opportunity to develop and raise living standards,” writes Senior Trade Policy Analyst Daniella Markheim.
We do have opportunities to help developing countries become more sustainable and economically prosperous. But they don’t involve the IMF and hundreds of billions of dollars annually in wealth transfers.
Here in Washington, people are discussing two things: Jim Zorn’s job security as the Washington Redskins’ head coach and health care, in that order. But there’s a $3.6 trillion gas tax on the table that already passed the House and is making its way through the Senate, and cap and trade has Americans all over the country concerned. The $3.6 trillion gas tax figure, which includes gasoline and diesel gas, comes from a new report from Senators Kay Bailey Hutchison (R-TX) and Kit Bond (R-MO) on the effects of climate change legislation. And the energy tax has rippling economic effects, as Senators Hutchison and Bond explain in their Washington Times op-ed:
Americans will be double-hit by the gas tax when it raises the costs of goods and services such as groceries and utilities they must continue to purchase. Energy costs are among businesses’ top operational expenses already. While companies face a variety of energy expenses, ranging from heating and cooling their work space to powering equipment and lighting, operating their vehicles is the most costly. Every company, from the small-town local florist to a package delivery service with nationwide operations, will be hard hit. In order for these businesses to withstand the heavier tax burden and to remain profitable, they will be forced to pass these energy cost increases along to consumers through higher prices.”
Some industries are more energy-intensive than others, and farmers and ranchers are hit particularly hard. Heritage Senior Policy Analyst Ben Lieberman writes, “In addition to higher diesel fuel and electricity costs, prices for natural gas-derived fertilizers and other chemicals will also rise. Everything else affecting agriculture, from the cost of constructing farm buildings to the price of tractors and other farm equipment, will also go up.”
According to the Hutchison-Bond report, U.S. farmers and ranchers will incur higher fuel costs of $550 million in 2020. That figure will jump to $1.65 billion by 2050. According to The Heritage Foundation’s cap and trade analysis, farm profits are expected to decline by 28 percent in 2012 and will be an average 57 percent lower from 2012-2035. Congress is attempting to buy the farm vote by touting them as the beneficiaries of a carbon offset program because farmers can use cleaner technology, reduce nitrous oxide emissions, or simply not grow crops. However, the revenue gained from offset revenue will pale in comparison to lost income from cap and trade.
Economic gains and environmental improvements aren’t mutually exclusive goals; in fact, they often go hand-in-hand. Hutchison and Bond say, “We can improve the environment and economy through American ingenuity and technological advancement, not with taxes and mandates that increase costs and burden American families and businesses.”
Instead, cap and trade significantly reduces the amount of resources the private sector can invest in newer, cleaner technology.
The full report is available here.