The economic cost of climate change legislation

April 23, 2009

 Diana Furchtgott-Roth– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.  The views expressed are her own. —

Chairman Henry Waxman of the House Energy and Commerce Committee announced yesterday that his American Clean Energy and Security Act of 2009 “will create millions of jobs, revive our economy, and secure our energy independence.”

The 648-page bill, co-sponsored by Waxman and fellow Democrat Edward Markey, Chairman of the House Energy and Environment Subcommittee, has been the subject of four days of committee hearings this week.  It would set new limits for greenhouse gas emissions, and prescribe radically new standards for energy production and use.

The most surprising word in the 648-page bill is one that isn’t there, not even once.  That word is “nuclear.” To discuss clean energy and security without mentioning increased development of nuclear energy, now powering 20 percent of America’s electricity with no greenhouse gas emissions, shows that Chairmen Waxman and Markey are not taking the issue seriously. They’re just trying to raise taxes on Americans and enhance the power of Congress and the agencies it oversees.

Over 100 pages in the bill are spent on measures to reduce greenhouse gases.  The bill requires greenhouse gas emissions in 2012 to be no more than 97 percent of 2005 emissions, 58 percent in 2030 and 17 percent in 2050.  This last target, four decades into the future, is incompatible with our present standard of living—and illustrates the arrogance of politicians who think that they can micro-manage the economy far beyond anyone’s capacity to foresee events.

The mechanism for this is a “cap-and-trade” program, proposed by President Obama in his budget, under which allowances—the number and price as yet unspecified—to emit greenhouse gases would be issued by the Environmental Protection Agency.  If a firm’s emissions exceeded its allowance, or cap, it would have to purchase more allowances, either from the government or from other firms.

As allowed emissions decline over time, firms would have to buy more allowances, driving up costs that inevitably would be paid to consumers.  The Obama March Budget forecast that revenues of $646 billion over eight years would be collected from cap-and-trade.

Representative Joe Barton of Texas, ranking Republican on the Energy and Commerce Committee, offered his version of candor at yesterday’s hearing.  “Ladies and gentlemen, if you like the idea of reducing your carbon footprint to the size that this legislation proposes, you can test drive these carbon emissions levels by living in Nigeria,” he said.

Cap-and-trade is only one part of the bill that would drive up prices.  Consider energy production.  The bill would require doubling in three years of the share of electric utility output that comes from renewable sources—wind, solar, geothermal, biomass—from three percent now to six percent in 2012.  In a further leap of central-planning arrogance, the bill would raise that standard in stages to 25 percent in 2025.

Sounds good? Maybe, but the technology to do it doesn’t exist. Nor do transmission lines to deliver wind energy from where it is likely to be produced,  in the central states, to the population centers on the coasts, where it would be consumed.

Solar energy might be produced in the southwestern desert and California, yet exporting it to Rhode Island and foggy Washington State is practically impossible.  The bill could address this problem by giving the Federal Energy Regulatory Commission additional authority to site transmission lines, yet it does not do so.

Or, take energy efficiency. If people don’t conserve energy voluntarily, the bill would require them to do so.  Existing federal energy efficiency standards for commercial and residential buildings would rise by 30 percent until 2016 for new buildings, and 50 percent thereafter. EPA would set by next year new emissions standards for cars, trucks, trains, and aircraft. Electricity distributors would be required to achieve energy savings beginning with one percent in 2012 and reaching 15 percent in 2020.

If this bill would create millions of jobs and revive our economy, why not make the standards tougher and create even more jobs?

With the global economy in the depths of the worst recession since the Great Depression, according to the International Monetary Fund, now is not the time to raise the cost of energy and consumer goods.  Chairmen Waxman and Markey should reconsider.


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Once again, you are changing the argument into purely economic terms. Certainly any switch to alternative energy is going to cost money. Is the status quo ‘cheaper’? Would a world 30 years from now, with submerged seaboards and an end to peak oil be ‘cheaper’? Imagine a hurricane like Katrina every couple of years due to warmer ocean waters. Now that’s a small bill to pay, correct? But since the climate argument seems to be over (Ms. Furchtgott-Roth doesn’t argue those points), she seems to feel that nuclear can somehow ‘solve’ the problem. But even if we were to go full-bore on nuclear (driving up the price of fuel material), we still need to replace the 100+ reactors that are nearly 30 years old, and then have to deal with the policial realities of handling the nuclear waste. Alternative energy isn’t relegated to solar and wind, either…I’m sure the 0 emmission hydroelectric Washington State uses more than covers their fewer solar days, and Rhode Island’s wind and wave power would suffice for their needs. But the salient point remains…we have an environmental energy problem. We need to fix it. We should do it in a cost effective manner. So, Ms. Furchtgott-Roth, knowing it must be fixed, what’s your fix?

Posted by Mike | Report as abusive

Why is Diana only calling for a nuclear “holocaust” against the US East Coast and Middle America? Why not the West Coast and Hawaii as well? After all, they’re also part of the “Black Carbon Tumor”. While she’s at it, why not just exterminate all industrialized humanity, leaving a scattered population of nomadic hunter-gatherers overseen by a select few treehugging whackos like herself?

Posted by Jim | Report as abusive

“Solar photovoltaic panels placed on just seven percent of the roof area currently covered by cities and residences could generate all of America’s electricity needs, significantly mitigating the effects of global warming.” — National Renewable Energy Lab studyWe have the need, the technology, the business case, and we have the public will to switch to clean and renewable energy sources today.Conversion costs off of fossil fuels and the benefits are all too apparent to those who see the big cost picture and can connect the dots of environmental and security consequences resulting from no or inadequate half measures towards carbon emissions mitigation.A honest perspective on the business-as-usual consequences of our historic energy policies source options is something the vested energy interests within the Republican party have consistently failed to consider, or demonstrate when the GOP leads.

Posted by Clean Tech | Report as abusive

Jim,the topic of the article is the economic cost of climate change legislation. a holocaust of the main sources currently responsible for carbon emissions would seem the most ‘economically cost-effective’ option to me given people think that investing in clean energy is too costly.Hawaii and west coast, and certainly not the rest of the world, don’t fit in with this criteria of world’s biggest polluters. California is basically an independent nation in these matters anyway.This criteria doesn’t discriminate against nationality or religion – just your life choice. Why should the rest of the world have to suffer to support the overweight, morally and financially bankrupt lifestyles of the world’s worst polluters? The rest of the world, including other industrial countries with perfectly adequate standards of living, can go back to enjoying the lords bounty without destroying it.Diana

Posted by PO | Report as abusive

¿Who defined that USA is the only in charge of the climate change legislation? This change is a worldwide concern.USA and some countries of Europe burned huge Terawatts of energy per hour, during 24 hours per day, during 365 days per year.Now is the time for pay to the world this crazy economical system.Each of your habitants must reduce the use of energy via laws that increase the cost of the energy in accordance with the range of consumption, more energy, more pay, but establishing as base line the standard consumption of a native habitant in a development country, as Colombia, living in one of the most rich natural regions, the few last cleaner system for the sustainability of the nature, responsibility of all in the land.

Posted by Roberto Navarro | Report as abusive

Unforunately, it seems Obama and the US government have no leverage Internationally and can do nothing but kiss and make-up with the rest of the world for the last 8 years. If we are going to get serious about our economy, and our environment, then we’re going to need much more courage and leadership from Washington. We need to stand up and claim our world leadership and call the bluff of every other world “leader” resisting their own responsibilties to their region, and to humankind.