Yesterday, Senators John Kerry (D-MA), Joseph Lieberman (I-CT) and Lindsey Graham (R-SC) unveiled an outline of their cap-and-trade proposal. Interestingly, their version of a national tax on American energy is hard to distinguish from earlier proposals such as the House-passed Waxman-Markey or the Senate committee-passed Boxer-Kerry.
All of these proposals have one thing in common: they hurt the economy. However, the Senators Kerry, Lieberman and Graham take great care in their 5-page document to detail the benefits of their proposal, and implicitly suggest why it is superior to each. Let’s debunk the major claims.
Claim: Better jobs, more manufacturing jobs, cleaner air.
A Heritage analysis of Waxman-Markey found that net job losses in 2012 could approach 1.9 million. The net manufacturing employment decreases by nearly 400,000 between 2012 and 2035, including hitting a high of 1.38 million lost jobs in 2035. Raising the cost of energy is bound to create a worse job climate, not a better one. Other organizations agree. Specifically, the Brooking Institute modeled a general cap and trade system and found that GDP in the United States would be lower by 2.5 percent in 2050, and unemployment would be 0.5 percent higher (1.7 million fewer jobs) in the first decade below the baseline or without cap and trade. The total tax revenue generated by 2050 would be $9 trillion. Even worse, there would be no environmental benefit. EPA Administrator Lisa Jackson acknowledged, “U.S. action alone will not impact world CO2 levels.”
Claim: Securing energy independence.
The need to secure “energy independence” and “ending our addiction to foreign oil” is a commonly made claim by politicians on the left and the right, but achieving energy independence is not a cause for concern nor should it be a driver for a cap and trade system. Cap and trade will not make us more energy independent by pumping billions of dollars into subsidies for wind, solar and other renewable energy sources because even after decades of handouts they have not been able to compete with more traditional, reliable energy sources. There is no low cost alternative for fossil fuels or a way we can transform our energy sector overnight without paying a hefty price. Adding provisions that subsidize nuclear plants that won’t be built given the current status quo or support coal and drilling measures that won’t occur because the bill’s other provisions will force it to be costly do not change the fact that this bill is an economic disaster. Attempting to achieve energy independence costs the economy more than just higher energy prices by diverting resources from more valuable uses to less valuable ones.
Claim: Creating regulatory predictability.
The Senators said, “Monday’s endangerment finding by the Environmental Protection Agency (EPA) underscores the importance of Congressional action to address greenhouse gas emissions before the EPA moves unilaterally.” Perhaps they missed Jackson’s statement on Wednesday in Copenhagen. She said, “This is not an ‘either-or’ moment. It’s a ‘both-and’ moment.” In other words, the Obama Administration does not want cap-and-trade to preempt their regulatory authority over the entire economy. Regulatory certainty is a good thing but not when it piles regulation on top of regulation that will make it harder for businesses to compete with businesses in other countries that do not face similar carbon constraints.
Claim: Protecting consumers.
Neither cap and trade nor any of its variations can protect consumers. The whole reason for a cap and trade system is to drive up energy prices high enough in order for people to use less. Despite claims that consumers will eventually save money on utility bills, the net effect is that consumers still pay more for energy and income and savings will fall. Proponents of cap and trade legislation say that rebating allowance revenue from the carbon caps to the consumers will offset the higher energy costs. Never mind the fact that the Waxman-Markey bill hands much of the money to businesses, whether the rebate checks would offset the rise in energy costs remains to be seen. But this scenario is highly unlikely to help most Americans. As carbon prices rise, so do the rebate checks, but so do the energy prices consumers must pay. Further, rebates or not, the higher energy prices would reduce economic activity by forcing businesses to cut costs elsewhere, possibly by reducing their workforce, and thus doing damage that no check would cover.
The bottom line: Adding a new Member of Congress or two to sponsor cap and trade legislation doesn’t change the outcome. This is not a jobs bill, nor is it an economic stimulus or a pollution reduction bill. It’s a net jobs destroyer that will cost American consumers in terms of higher energy prices and lost income for years to come. And the public isn’t buying it no matter how it’s sold.
Nick Loris co-authored this post.
As Congress tries to knock out the economy in one fell swoop with its economically dangerous cap and trade proposal, the Environmental Protection Agency (EPA) is taking a different approach: proposing smaller, regulatory jabs at the economy with the intent to reduce carbon dioxide and other greenhouse gas emissions.
First, the EPA worked with the Department of Transportation to propose new vehicle standards - a 5 percent annual increase in fuel economy starting with the 2012 model year, reaching 35.5 miles per gallon by 2016. Last week, they announced the largest emitters of greenhouse gases must report their emissions.
Now, they’re going after large facilities. Just yesterday, “The Environmental Protection Agency announced plans to regulate greenhouse gas emissions from power plants, factories and oil refineries — a warning shot to Congress that if it does not move to curb global warming, the Obama administration will act on its own.”
In her speech, EPA Administrator Lisa Jackson said,
By using the power and authority of the Clean Air Act, we can begin reducing emissions from the nation’s largest greenhouse gas emitting facilities without placing an undue burden on the businesses that make up the vast majority of our economy. This is a common sense rule that is carefully tailored to apply to only the largest sources — those from sectors responsible for nearly 70 percent of U.S. greenhouse gas emissions sources. This rule allows us to do what the Clean Air Act does best – reduce emissions for better health, drive technology innovation for a better economy, and protect the environment for a better future – all without placing an undue burden on the businesses that make up the better part of our economy.”
Although the newly proposed EPA rule will not apply to schools, restaurants and small businesses, it’s the large emitters of carbon dioxide that provide America with 85 percent of its energy needs. Regulating greenhouse gases with “the use of best technologies” will mean higher costs for energy passed on to schools, restaurants, small businesses, and of course, the consumer. Further, EPA’s attempt to exempt smaller entities is on flimsy legal ground and is not likely to withstand the inevitable and endless lawsuits from environmental activists
The Heritage Foundation’s analysis of the carbon capping Waxman-Markey bill project higher energy and other costs for a household of four - nearly $3,000 per year between 2012 and 2035. Gasoline prices will rise by 58 percent ($1.38 more per gallon) and average household electric rates will increase by 90 percent by 2035. And if the EPA is running the show, the micromanaging of our economy and the compliance costs that come along with it will only increase the costs.
On April 17, the EPA issued an endangerment finding, saying that global warming poses a serious threat to public health and safety. Interestingly, Jackson spoke as if 60-comment period on the endangerment finding and the EPA’s plan to regulate carbon dioxide was met with unanimous support. She said, “We have received more than 400,000 responses in the 60-day public comment period. And we soon expect a final document that will lay the foundation for reducing greenhouse emissions and confronting climate change.”
But through The Heritage Foundation’s StopEPA.com site, nearly 30,000 of you voiced your opinion against EPA regulations. Other organizations, such as The US Chamber of Commerce, American Solutions, FreedomWorks, and the Institute for Energy Research aggregated similar numbers, but there’s no mention of that.
Contrary to Administrator Jackson’s assertions, using the Clean Air Act to regulate CO2 would likely be the most expensive environmental regulation in history and will bypass the legislative process completely. While some Members of Congress undoubtedly support the EPA’s attempt to curb global warming, the fact that unelected and unaccountable EPA bureaucrats are trying to use backdoor rulemaking to reduce carbon dioxide makes it all the more objectionable.