Yesterday, Senator John Rockefeller (D-WV) introduced legislation that he said would “safeguard jobs, the coal industry, and the entire economy.” Sounds like a pretty solid policy prescription for an ailing economy. What would his legislation do?
…suspend, during the 2-year period beginning on the date of enactment of this Act, any Environmental Protection Agency action under the Clean Air Act with respect to carbon dioxide or methane pursuant to certain proceedings, other than with respect to motor vehicle emissions, and for other purposes.
In English, it would prohibit the EPA from regulating carbon dioxide and methane emissions from stationary sources for two years. It is well understood that the EPA regulations threaten the economic vitality of our country and have already inhibited our ability to create jobs during the recession.
What is interesting about Rockefeller’s approach is that EPA Administrator Jackson has assured him that no new sources will be forced to apply for permits until the “latter half of 2011.” In effect, Rockefeller’s two-year delay amounts to no more than nine-month delay.
Delaying damaging regulations is not inherently bad, unless it undermines the process of eliminated the damaging regulations in their totality. The nine-month delay proposed by Rockefeller is likely to cannibalize support for a resolution offered Senator Lisa Murkowski (R-AK) that would officially disapprove of the EPA’s endangerment finding and declare that rules stemming from the finding “shall have no force or effect.”
Ironically, Senator Rockefeller’s position that “Congress, not the EPA, must be the ideal decision-maker” on the issue of global warming is undermined by his legislation. For Congress to have a serious, thoughtful debate on the science and economics of global warming legislation, the EPA’s regulatory threat cannot be looming.
From an economic perspective, Rockefeller’s temporary delay will do little to settle the nerves of businesses that are waiting to make capital investments. “Uncertainty,” according to the National Federation of Independent Business (NFIB), “is the enemy of economic growth and investment, and Washington, D.C., the usual source of uncertainty, is delivering plenty of it.” A nine-month delay does not reduce the uncertainty associated with the EPA regulations.
If Senators are serious about economic growth and job creation, they will disapprove of the EPA regulations. Anything less is a mere fig leaf.
As the national average of gasoline creeps to three dollars a gallon, economists are warning that high gas prices in the United States could slow the economic recovery. Other countries’ economies are recovering more quickly and increased production and activity is putting upward pressure on oil prices. That coupled with a relatively weak US dollar spells trouble for American drivers. Throw in carbon dioxide cuts and gasoline prices could reach unprecedented levels:
To meet the Obama administration’s targets for cutting greenhouse gas emissions, some researchers say, Americans may have to experience a sobering reality: gas at $7 a gallon. To reduce carbon dioxide emissions in the transportation sector 14 percent from 2005 levels by 2020, the cost of driving must simply increase, according to a forthcoming report by researchers at Harvard’s Belfer Center for Science and International Affairs. The 14 percent target was set in the Environmental Protection Agency’s budget for fiscal 2010.”
If you think it’s out of the question, it’s not. Members of Congress are working with oil companies now to levy a carbon fee on the transportation sector: “Key senators are weighing a request from Big Oil to levy a carbon fee on the industry rather than wrap it into a sweeping cap-and-trade system that covers most of the U.S. economy. If accepted, the approach — supported by ConocoPhillips, BP America and Exxon Mobil Corp. — could rearrange the politics of the Senate climate debate and potentially open up votes that may not be there otherwise.”
Such an approach would do nothing but cause more economic pain for American households. Higher gas prices lower employment, income, and spending, and Americans will have to dip into their savings to pay for higher gas prices. Heritage economist Karen Campbell details these effects in her paper, “How Rising Gas Prices Hurt American Households.”
Furthermore, a carbon fee would do very little to reduce CO2 emissions. As Senior Policy Analyst Ben Lieberman points out, gasoline prices have already reached these levels in Western Europe where nations have made commitments to cut CO2, yet we are outperforming them in terms of emissions reductions.
Higher fuel prices adversely affect just about every aspect of the economy. Food prices, for instance, will increase as it costs more to harvest, manufacture and transport food. And as the price of airline tickets rise, people will travel less. It may be easier to support these policies when public transportation is readily available – although the cost of public transportation will rise as well. However, many parts of the country do not have access to public transportation and have to drive a significant distance just to get to a grocery store.
Indeed, the rural, poorer areas will be hit hardest by a spike in gasoline prices as residents in these areas spend a larger percentage of their income on fuel. When gasoline prices passed the $4-per-gallon mark, Fred Rozell, pricing director at a fuel analysis firm said, “This crisis really impacts those who are at the economic margins of society, mostly in the rural areas and particularly parts of the Southeast. These are people who have to decide between food and transportation.” This map provided by the New York Times shows the percentage of income spent on gasoline throughout the country.
A targeted approach to reduce carbon dioxide emissions will give us the same results as a cap and trade system: Lots of economic pain for negligible reductions in emissions.