June 4, 2008

June 4, 2008 | Commentary on

Carbon-Cap Conundrum Losing Legislation

Think the recent spate of Big Government initiatives on Capitol Hill is ambitious? You ain't seen nothing yet. Move over, $307 billion farm bill. Forget about that $300 billion bailout for greedy mortgage bankers and their irresponsible borrowers.

Because when it comes to expanding Uncle Sam's girth, nothing tops the global warming cap-and-trade proposal currently before the Senate -- the America's Climate Security Act, widely known as the Lieberman-Warner bill (named after its two lead sponsors, Independent Joe Lieberman and Republican John Warner).

Beneath all its painfully precise social engineering lies one objective -- to force Americans to change their way of life so dramatically over the next few decades that global temperatures will fall. How? Through an unforgiving cap on greenhouse-gas emissions. Specifically, carbon-dioxide emissions must be 19-percent below the 2005 U.S. level by 2020, and 71 percent lower by 2050. The only way to meet these goals is to drive up energy costs -and federal revenues -significantly. This is essentially a massive new energy tax, calculated by the Congressional Budget Office to increase federal revenues by $1.2 trillion in the first 7 years.

And what environmental benefit can we expect from all this? According to one oft-cited analysis, if all the world's industrial nations were to comply fully with the similarly ambitious goal in the Kyoto Treaty, the world's climate would be all of 0.07 degrees Celsius cooler. "Such a miniscule change in global temperatures," the Competitive Enterprise Institute's Marlo Lewis notes, "would be too small to detect."

Keep that metric in mind as you read on.

The crucial dynamic at work here- call it the carbon-cap conundrum -- is that there are only two ways to achieve Lieberman-Warner's objective without flat-lining the economy.

The first is by increasing dramatically our use of clean nuclear energy. Indeed, an abundant amount of nuclear energy is essential if we are to reduce greenhouse-gas emissions. This, in turn, requires lawmakers to identify ways to circumvent the inevitable thicket of lawsuits and regulatory challenges that environmental groups would mount to block the construction of new nuclear power plants and the storage of nuclear waste. Absent this, the costs of cap-and-trade proposals rise dramatically.

The second way to achieve the bill's goals is more problematic. Scientists will have to develop, design, and deploy carbon "capture and sequestration" technology that works in the manner envisioned by the bill's architects -- and soon. While oil and gas companies have used a form of sequestration technology for decades to extract additional increments of oil and gas from wells, experts say a version suitable for the global-warming wars is still decades away.

Leading environmental groups dismiss these challenges. Greenpeace argues on its website that "hundreds of technologies are now available, at very low cost, to reduce climate damaging emissions" and that transitioning to this "new era of energy" will bring "economic growth, new jobs, technological innovation and . . . environmental protection."

But a recent analysis of the Lieberman-Warner bill by my colleagues at the Heritage Foundation concludes that its economic consequences will be dire. In the manufacturing sector nearly 3 million blue-collar jobs would disappear. Incomes would fall, fuel prices would skyrocket, and carbon tariffs on goods imported from countries that do not meet the bill's rigorous standards would add to the cost of imported clothes, consumer electronics, and automobiles.

Americans are expected to bear all these economic costs, remember, in exchange for an imperceptible change in global temperatures four decades hence. As constituents begin to appreciate these costs, the prospects for cap-and-trade bills should diminish.

In April, legislators jettisoned Maryland's own ambitious version of climate control legislation. As the Baltimore Sun reported, all momentum on behalf of the bill came to a screeching halt after a few dozen members of the United Steelworkers union, which represents about 5,000 workers in Maryland's steel, brick, cement, chemical, and paper plants, descended on Annapolis "wearing T-shirts that said in green lettering: 'Save our jobs.'" Their message, as articulated by one of the protesters, was clear. "[T]his should not be forced upon us. We have to make sure that jobs don't go to other states or other countries."

If a few dozen steelworkers can spook the entire Maryland legislature, what will happen in Washington once they complain to their congressional delegation that the Lieberman-Warner bill would torpedo over 11,000 manufacturing jobs in Maryland alone? Multiply that by their colleagues in 49 other states and you get the idea.

To preempt this, Sen. Barbara Boxer (D., Calif.), who chairs the Senate Environment Committee, offered her own updated version of Lieberman-Warner that contains a dizzying array of subsidies (drawn from all those to alleviate the pain the bill would inflict on us.

The subsidies weigh in at a cool $5.575 trillion (yes, trillion with a "t") over the next four decades. A very partial list of this cornucopia of new Washington largesse includes:

  • $800 billion for consumers "in need of assistance related to energy costs."
  • $911 billion for electric companies "to ensure that consumers are protected from increases in energy costs."
  • $566 billion for State governments for everything from reducing the bill's impact on low-income consumers (hey, didn't we do that already?) to encouraging recycling.
  • $213 billion for carbon-intensive manufacturers in the iron, steel, pulp, paper, cement, rubber, chemicals, glass, ceramics, sulfur hexafluoride and aluminum industries.
  • $307 billion for utilities that use fossil fuels.
  • $237 billion to help "wildlife" adapt to global warming.
  • $190 billion for a job-training program for all those who lose their jobs under this bill.
  • $342 billion for a global-warming foreign-aid program -- euphemistically described as "international partnerships to adapt to global warming."

Liberals instinctively want their global-warming regime to resemble the tax code. Saturate it with special-interest provisions to protect favored constituencies from pain. Place a disproportionate share of the burden on the privileged few. If the wealthiest 1 percent of taxpayers can pay 40 percent of all income-tax revenue, why can't they also cough up 40 percent of all CO2-emission reductions? And, if the bottom half of taxpayers only have to pay 3 percent of taxes, then why can't we exempt them from the economic pain and dislocations inherent in any cap-and-trade scheme?

But this global-warming free lunch can't be subsidized away. Why not? That unforgiving cap on overall carbon emissions in Lieberman-Warner means if you alleviate the burden on one favored group, you necessarily have to increase it on others. The reductions ultimately have to come from somewhere. We must comply with that cap.

Industries that don't lobby successfully for a subsidy will incur the most concentrated economic harm. And, of course, they will pass these costs on to all those who thought they had hired really good lobbyists to protect their interests.

Either way, we lose.

Michael Franc is Vice President of Government Relations for The Heritage Foundation.

About the Author

Michael Franc Distinguished Fellow
Government Studies

First appeared in National Review Online