Here’s the theory about the new U.S. position on greenhouse gases. The official finding by the U.S. Environmental Protection Agency that the emissions endanger human health sets the stage for permit requirements on power plants, factories and automobiles. It also supplies President Barack Obama with more evidence at the Copenhagen summit of a “new normal” in America when it comes to climate policy. And back home, it supposedly gives a nudge to the Senate where cap-and-trade legislation is stuck on the back burner.
But in practice, the only thing certain about the EPA ruling is more regulatory uncertainty leading to less economic growth and fewer jobs. Bad news, to be sure, for American businesses already flummoxed by the mercurial state of healthcare, financial and tax reform. Call it Obama’s Uncertainty Tax.
While a cap-and-trade bill has already passed the House of Representatives, few Capitol Hill observers expected the Senate to approve one, even by the end of 2010 thanks to the anemic economy and political risks for incumbent Democrats facing midterm elections. What’s more, expectations of a more Republican-leaning congress after 2010 made it seem like economy-wide carbon caps were sliding off the Obama agenda for the foreseeable future.
But now it’s conceivable carbon restrictions would be implemented as early as next year – even though the EPA itself admits its efforts would be more disruptive and less efficient than congressional action. Such an optimistic timetable assumes no legal challenges. But there will be plenty of those. Already, business groups are preparing to file suit against the EPA. It could fall to U.S. courts to determine the future of the nation’s approach to climate policy. This is a nightmare scenario for the private sector when it comes to planning for new expansion or hiring. Note that the big problem with the job market at the moment is not so much job losses and zippo new jobs being created. It will take a year of 4 percent growth adding 250,000 jobs a month to lower the unemployment rate to 9 percent.
Of course, about the only thing worse than regulatory uncertainty would be for the EPA to follow through with its top-down, command-and-control approach to dealing with perceived climate change.
One solution would be for Congress itself to act. GOP strategists would love to disrupt reeling Democrats with another controversial proposal – which is precisely why it won’t happen. Dems in the Senate are well aware of the shellacking their House colleagues have taken on their cap-and-trade vote.
Another option would be for the White House to devise a plan that would generate some bipartisan support. One idea might be a carbon tax whose revenue could be distributed back to citizens as a dividend, or used to offset payroll taxes. Such a refund could be progressive and popular.
But the most likely scenario is no cap-and-trade and no carbon tax, just more government “investment” in clean energy. But for now, workers and business are left to keep paying the Uncertainty Tax.