May 24, 2009

Waxman-Markey: Failing to Solve A Non-Problem

In a classic example of bureaucratic inertia rearing its ugly head, the U.S. Congress is moving ahead with its own answer to a problem that growing segments of both the scientific community and the American people no longer consider to be the dangerous threat they once feared it might be.

Even the most skeptical critics of the PC global warming alarmism have to acknowledge the slight warming (approx one degree Celsius) of the planet over the last 150 years, and many of us concede that man-made carbon emissions may have been a factor in that warming. But by now the facts on the ground should be forcing those same alarmists to acknowledge that there are other forces at work as well...apparently even more powerful forces than anthropogenic global warming, as it appears they have been able to counteract AGW over the past decade, effecting a net cooling of the planet over that time. Alas, Congress and their White House enablers either didn't get the memo, or more likely, simply have an agenda that doesn't have a lot to do with slowing the rise in global temperature.

And as Terence Corcoran said in the National Post, the more Americans learn about cap-and-trade legislation...specifically the Waxman-Markey bill, the less they like it. Spread the word.

Last week, the U.S. Chamber of Commerce released an economic study projecting lost jobs, slower growth, higher energy costs and damaged vital energy sectors of the U.S. economy. Also coming under fire is the cap-and-trade energy pricing system proposed by President Obama. Charlie Munger, CEO of Warren Buffet’s Berkshire Hathaway, called the plan “monstrously stupid.” In an interview with CNBC, Mr. Munger said: “It would be a huge shock to the economy and it wouldn’t accomplish very much given the fact that the vast majority of the pollution, or rather the CO2, is coming from a place like China. And so I think it would be almost demented if we would rush into cap-and-trade right now in the middle of this economic crisis.”

Hey, man...that's our Congress you're talking about. Monstrously stupid and almost demented is what we do there.

There seems to be wide agreement that the proposed Waxman-Markey cap-and-trade legislation will severely harm the U.S. economy, slashing GDP, dramatically increasing energy costs, and killing hundreds of thousands of jobs per year. Consider as one source this detailed study of the economic effects of cap-and-trade legislation done by the George C. Marshall Institute. (via Power Line, which provides some general facts about atmospheric CO2 in this post)

The San Francisco Examiner calls it "a license to cheat and steal".....

This cap-and-trade bill — actually called the American Clean Energy and Security Act of 2009, or the Waxman-Markey bill — would mandate severe reductions in U.S. greenhouse gas emissions. Since emissions are mostly generated by energy use (heating your home, cooling your groceries, driving to work, etc.), these targets would effectively mandate energy rationing. Since these targets are not based on economic or technological realities, there can only be one outcome: much higher energy prices.

Severe limitations on emissions could easily turn well-intentioned policy into an opportunity for shady moneymaking schemes at the expense of the environment and American households.

Research indicates that implementation of a U.S. emissions market could drive up energy costs for Americans anywhere from $324 to a whopping $3,100 per year. And because low-income families spend a greater percentage of their earnings on energy, this burden would fall heaviest on those least able to afford it.

In contrast, the financial benefits would be enjoyed by Wall Street opportunists and special-interest groups. The government-regulated trade of carbon dioxide opens the door to the creation of risky financial tools like the derivatives, hedges and credit default swaps that led to our recent economic crisis and the scandals associated with it.

Anyone who doubts this risk need only look at the experience of Europe’s cap-and-trade system. Not only has it been plagued with fraud and abuse, it failed to meet its emissions-reduction targets.

Even The Economist says it's full of "handouts and loopholes", and calls it "worse than expected".

Business leaders, even those already positioning themselves to benefit by the carbon wars, have begun to see that cap-and-trade emissions credits will be anything but "free".

And a congressman is sponsoring legislation to force utilities to identify the costs of the legislation on consumers' utility bills, no doubt in part to hold Obama to his pledge not to increase "by one dime" the taxes of 95% of Americans.

Since the supporters of cap-and-trade legislation haven't put forth a cost-benefit analysis to justify the massive taxation regime they are proposing, the estimable Jim Manzi has put one together. Go read it all, but Manzi says that "In the end, clarity about costs and benefits is the enemy of Waxman Markey."

There's little debate that the bill would have significant negative impact on the economy. So why are we doing it again? Even the proponents, to the extent they even speak anymore of "warming", concede the total net effect on global temperature would be minimal... a fraction of one degree Celsius, as little as 0.1 to 0.2 degrees...total!...by the end of the century! Incredibly, the bill's supporters aren't even embarrassed by the meager projection of "preventing" a mere two years of warming. In other words, global temperature would reach the same level in 2102 that it would have reached in 2100 without this destructive legislation. What a bargain!

But I guess if they're not embarrassed by plowing ahead with an economy-busting, job-killing, record-setting tax increase...all to combat a slight warming trend that itself has been non-existent since 1998....what would cause them embarrassment?

In a later post, Manzi addresses the people who claim that the U.S. should act unilaterally on carbon emissions, thus setting an example and (somehow?) increasing our negotiating leverage to persuade China and India to reverse their longstanding opposition to purposely slowing their own economic growth. Talk about the triumph of hope over experience...

Will Wilkinson notices that this thinking runs counter to a key liberal argument...

The idea is that coordinated international action toward carbon reduction is a global public good, and that the probability of effective coordination increases significantly if the U.S. acts unilaterally. HOW DOES THIS WORK? Standard statist-liberal reasoning about public goods is that they will not be provided unless there is a coercive mechanism in place (e.g., a state) to solve the assurance problem. But there is no state with global jurisdiction. So am I to understand that folks making the argument about the crucial role for Waxman-Markey in solving the international collective action problem don’t really believe the standard story about the need for coercion in assuring compliance? Because that would sure change a lot of debates about a lot of things! To put it another way: if you think that the probability is low that smaller-scale public goods can be provided through voluntary mechanisms without government, shouldn’t you think the probability is even lower the larger the scope of the coordination problem?

The Examiner editors found this gem among other "surprises" buried deep in the Waxman-Markey legislation...

“Title IV, Subtitle B, Part 2, Section 426, of the American Clean Energy and Security Act of 2009 states: ‘An eligible worker (specifically, workers who lose their jobs as a result of this measure) may receive a climate change adjustment allowance under this subsection for a period of not longer than 156 weeks…80 percent of the monthly premium of any health insurance coverage…up to a maximum payment of $1,500 in relocation allowance…and job search expenses not exceed[ing] $1,500.’”

If cap-and-trade is an energy and global warming bill, why is a three-year package of unemployment benefits, job training and relocation expenses buried deep within its fine print? And why is a federally subsidized “job bank” needed if laid-off workers would quickly be rehired for higher-paying “green” jobs? The fact that generous unemployment benefits are buried in the bill means that “green jobs are bunk,” the conservative Heritage Foundation’s Ben Lieberman told The Examiner.

A Heritage analysis also found that Waxman-Markey is the largest, most intrusive energy tax increase in American history. It would reduce the nation’s GDP by $7.4 trillion, raise electricity rates 90 percent and gasoline prices 74 percent. Apparently, the authors of this legislation were unaware that a recent poll found six out of 10 Americans oppose energy policies that raise their electricity bill by even one cent, much less practically double it. And the final kicker is that the bill’s effect on greenhouse gases emissions would be just barely measurable.

After listing a number of the various mandates contained in the Waxman-Markey legislation, this CEI article concludes that government coercion for its own sake is part of the attraction for our leadership...

These measures are economically and environmentally irrational even if you believe that global warming is a “planetary emergency.” As the Charles River Associates (CRA) report for the National Black Chamber of Commerce points out, the renewable electricity, CCS, electric vehicle, and energy efficiency mandates will not yield net emission reductions beyond what the bill’s emission caps already require. The targeted interventions may accelerate GHG reductions in some industries or sectors, but that just allows emissions to increase elsewhere in the economy without breaking the cap.

The rationale for cap-and-trade is that it allows the market to find the least-costly methods of reducing emissions. By superimposing renewable electricity, CCS, electric vehicle, and energy efficiency mandates on that system, Waxman-Markey dictates the means as well as the goals.

There are two possible outcomes. First, which is exceedingly unlikely, the cap motivates reductions in exactly the same ways as the targeted mandates and incentives. In that case, observes CRA, the mandates “would waste resources on needless monitoring, measuring, enforcement and compliance.”

If, as almost certainly would happen, the mandates compel different actions and investments than industry would otherwise undertake to meet the cap, then the same emission reductions would be achieved at higher cost. The targeted mandates and incentives “can only substitute more costly GHG cuts for those that could have been made at lower cost.”

So what is the point? Why tout cap-and-trade as an “efficient,” “market-based” solution and then gunk it up with cookie-cutter, command-and-control measures?

Several reasons come to mind including deep distrust of markets, an abiding belief in old-fashioned central planning, the desire to rig market outcomes to benefit or punish certain interests, and the desire to create more work (endless full employment) for bureaucrats and lawyers.

One that should not be discounted, though, is the pleasure some people derive from placing their heels on other people’s necks. Politics is chiefly about the organization and application of power. It tends to attract people who enjoy bullying and coercing others. To regulate is to coerce. Command-and-control regulation is more coercive than the market-based variety. So despite their real or feigned enthusiasm for cap-and-trade, many climate activists are hopelessly addicted to mandates.

Related:

C02 Fairytales

Posted by dan at May 24, 2009 8:21 PM