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.
Utah’s House Legislature took a strong stance against cap and trade as well as the alleged scientific consensus by passing a nonbinding resolution yesterday 56-17. Specifically, the resolution “urges the United States Environmental Protection Agency to halt its carbon dioxide reduction policies and programs and with its “Endangerment Finding” and related regulations until a full and independent investigation of the climate data conspiracy and global warming science can be substantiated.
Most state representatives are not only questioning the scientific consensus but also the economic implications of cap and trade or similar carbon dioxide regulations. “I’m afraid of what could happen to our economy, to our rural life, to our agriculture, if such a detrimental policy continues to be pursued for political reasons,” said Rep. Kerry Gibson.
Heritage economists modeled the economic effects of a cap and trade system by state. By 2035, Americans living in the state of Utah will see their electricity prices rise by $805.04 and their gasoline prices rise by $1.26 per gallon solely because of the Waxman-Markey cap and trade bill passed in the House. As the economy adjusts to rising energy prices, employment will take a big hit in Utah. Beginning in 2012, job losses will be 14,875 higher than without a cap-and-trade bill in place. And the number of jobs lost will only go up, increasing to 23,962 by 2035.
Jim Scarantino, editor of the New Mexico Watchdog, hopes the Land of Enchantment follows suit. Scarantino writes, “Although proposed legislation to give the Environment Department and the Environmental Improvement Board authority to work on implementing a cap and trade regime for New Mexico has died in this legislature, the EIB is moving forward to consider a petition by New Energy Economy of Santa Fe and other environmental groups to impose a cap on C02 emissions statewide.”
If a federal plan to reduce carbon dioxide won’t do anything to reduce the earth’s temperature, you can imagine what a state plan would do. Nothing but create economic hardships for the state of New Mexico.
Utah’s rejection of the scientific consensus is a welcoming step and echoes many Congressional calls for an investigation and more scientific integrity. Capping carbon dioxide emissions will cost money and jobs and to cap CO2 based on inconclusive evidence makes it that much worse.
And maybe it’s time to take a second look at the Western Climate Initiative. The initiative includes both Utah and New Mexico, along with Arizona, California, Montana, Oregon, and Washington, and the Canadian provinces of British Columbia, Manitoba, Ontario, and Quebec and the goal is to reduce greenhouse gas emissions 15 percent below 2005 levels by 2020. When Senior Policy Analyst Ben Lieberman testified before the House and Senate Western Caucus last year, he warned that cap and trade would disproportionably affect the West. In fact, “Citing financial worries, the State of Arizona has backed out of a broad regional effort to limit greenhouse gas emissions in the West through a cap-and-trade system.”
The West is getting it. When will Washington?