March 20, 2009
By Ben Lieberman
There is little doubt that legislation to address global warming
will be very expensive. Nonetheless, many had thought it to be
inevitable in 2009. President Obama supports it, as do most
Congressional Democrats, who have expanded their majorities in the
House and Senate. But the weakening economy has changed the
political landscape nearly as much as the elections themselves, and
it has reduced the prospects for major climate change action this
year. If so, the respite would be a real silver lining to the
economic downturn, as the so-called cap and trade measures
currently under consideration are likely to do far more harm than
good. Moreover, the recession should provide time for a serious
reevaluation of the federal government's flawed approach to the
The Leading Options To Address Global
Concern that carbon dioxide emissions from fossil fuel
combustion are gradually warming the planet has emerged as the
major environmental issue of the day. Though the science is not
settled, as some claim, many in Congress consider it settled enough
that they have moved on to debating proposals to reduce those
The only global warming bill to get serious consideration in
2008 was the America's Climate Security Act in the Senate. This
legislation, sponsored by Senators Barbara Boxer (D-CA), Joe
Lieberman (I-CT), and John Warner (R-VA), was a so-called cap and
trade bill. Under it, greenhouse gas emissions from regulated
entities would be capped at 2005 levels beginning in 2012. Each
electric power plant, refinery, factory, and other regulated entity
would be allocated rights to emit specified amounts of carbon
dioxide. Those entities that reduce their emissions below their
annual allotment can sell their excess rights to those who do
not -- the trade part of cap and trade. Over time, the cap would be
ratcheted down until a 70 percent reduction below 2005 levels is
reached in 2050 -- essentially energy rationing.
Carbon dioxide is the ubiquitous and unavoidable byproduct of
fossil fuel combustion -- the coal, oil, and natural gas that
currently provide 85 percent of America's energy. Thus, any effort
to substantially curtail such emissions would have costly and
disruptive effects throughout the economy and an adverse impact on
In effect, a cap and trade bill works like an energy tax because
it drives up the cost of fossil fuels so that individuals and
businesses are forced to use less of them.
Senate debate over the America's Climate Security Act commenced
last June, just as gasoline was beginning to reach $4.00 a gallon
across the country. The Heritage Foundation estimated that the bill
would increase gasoline prices by approximately 29 percent by
2030. Even proponents of the bill had to admit
that their efforts would likely lead to higher pump prices. Not
surprisingly, the public anger over $4.00 gas was a big factor in
sinking the bill, which was withdrawn after only 3 days of
In addition to gasoline, the expected impact of the bill on
other energy sources including electricity (70 percent of which is
derived from coal or natural gas) was even more significant. The
overall cost to the economy of more expensive energy was estimated
by The Heritage Foundation to be between $1.7 trillion and $4.8
trillion in cumulative gross domestic product (GDP) losses by
2030. The estimates in this analysis were roughly
similar to those from the Massachusetts Institute of Technology,
Environmental Protection Agency, Energy Information Administration,
CRA International, and the American Council on Capital
Formation/National Association of Manufacturers. The reduced economic
output would translate into hundreds of thousands of lost jobs,
especially in the manufacturing sector. It should be noted that these
are net job losses, after including the much overhyped "green jobs"
that would be created by such government mandates.
New cap and trade proposals are being introduced that are
generally similar to the America's Climate Security Act. They will
serve as a starting point for the climate change debate in
Beyond legislation, the EPA is currently considering regulating
carbon dioxide and other greenhouse gas emissions under the Clean
Air Act. If the agency chooses to take this step, it would have to
regulate these emissions from motor vehicles as well as a million
or more energy-using businesses and farms. The Heritage Foundation
estimates the impact attributable to this massive and unprecedented
regulatory proposal at a cumulative GDP loss of $6.8 trillion
through 2029 and up to 2.9 million lost jobs in the manufacturing
The EPA regulations, or at least the threat of them, are being
used to spur legislation. By being potentially more cumbersome and
costly than a cap and trade bill (no mean feat), such regulations
may make legislation look good by comparison.
The Impact of the Downturn
Despite support from the new administration and Congress, cap
and trade bills are too costly and complex to be considered a sure
thing even under the best of economic circumstances. And today we
are in the midst of a severe and possibly long-lasting recession.
Cap and trade measures would exacerbate the very economic concerns
that have now been heightened by the downturn.
It should be noted that a weaker economy does not make global
warming measures any more expensive. In fact, a recession would
make them a bit cheaper, at least initially, as the required energy
use reductions would be partially reached by the lower economic
activity. Indeed, the only times America saw substantial declines
in greenhouse gas emissions was during past recessions. But the
impact of an economic downturn is also political. Just as $4.00 a
gallon gas last June served to shine a harsher light on a bill
likely to raise pump prices further, continued economic woes would
spark greater public scrutiny of any global warming bill's impact
on jobs and growth.
Consider the unemployment rate, currently getting widespread
attention as it hit 7 percent for the first time in 15 years.
Rising to 8 or 9 percent in 2009 seems likely, and reaching or even
exceeding 10 percent is not a far-fetched prediction. Under those
circumstances, a global warming bill likely to kill additional jobs
would not go over well with the public and would stand in bizarre
contrast to the efforts to enact and implement a stimulus
Buying Time To Reconsider Global Warming
The most significant impact of the economic downturn on global
warming policy may be in buying time. For 2009, the new Congress
and president will focus more on economic issues and will likely
avoid anything like cap and trade that could add to the economic
In the meantime, the case for cap and trade will most likely
weaken, both economically and scientifically.
We are already seeing the unraveling of global warming policy in
Western Europe. These nations have adopted the 1997 Kyoto Protocol,
the international treaty to reduce greenhouse gas emissions, and
instituted a cap and trade program in 2005. In so doing, they have
embarked on a climate policy many want America to follow. But
Europeans are currently learning the hard way that ratcheting down
carbon dioxide emissions in this manner is extremely difficult and
expensive. In fact, most of these nations have not reduced their
emissions over the last decade, and indeed a number have
experienced faster increases than those in the U.S.
Several western European nations are not on track to meet their
Kyoto Protocol targets by the 2008-2012 compliance period, and many
that are on track are doing so largely by means other than reducing
emissions. Efforts to require additional post-2012 reductions are
falling apart in the face of economic concerns. Affected European
industries, from German carmakers to Polish utilities to Italian
steel producers, are demanding exemptions and special deals, and
several nations have threatened to abandon the process. This
unfolding failure will become more and more evident as time goes on
and will undercut the efforts to place the American economy on the
More importantly, the Kyoto treaty would not have made much
difference even if all industrialized nations were in full
compliance. By one estimate, the treaty would have reduced the
earth's future temperature by 0.07 degrees Celsius by 2050, an
amount too small to even verify. This estimate likely overstates
the impact, given that carbon dioxide emissions from China, India,
and other developing nations are increasing at rates several times
higher than in the developed world. These nations are
currently exempted under Kyoto and insist on remaining so.
China alone now out-emits the U.S. and its emissions are
projected to increase six times faster than in the U.S.
This underscores the fact that a U.S.-only cap and trade bill would
result in considerable economic pain for a vanishingly small
environmental gain. As America's percentage of world emissions
continues to shrink, the case for costly unilateral action will get
harder to make.
The added time also offers the opportunity to reflect upon the
science. After all, cap-and-trade bills are a solution only to the
extent that global warming is a problem in the first place, and the
evidence of late is taking a turn away from alarmism.
Most notably, 2008 turned out to be a cooler year than 2007, and
by many accounts there has been no additional warming for all or
most of the last decade. This non-warming countertrend is becoming
too big to ignore, especially if it continues into 2009.
In addition, the truly terrifying global warming claims -- things
like massive sea level rise and major increases in the frequency of
powerful storms like Hurricane Katrina -- are simply not happening.
For example, after a very bad 2005 hurricane season that included
Katrina as well as other devastating storms (and much hype from Al
Gore and the media about global warming being the cause), we have
since had two generally below average and one above average
hurricane years -- hardly the deadly trend we were warned of. Nor has
there been anything even close to a repeat of Katrina in terms of
loss of life or economic harm.
The global warming-inspired gloom and doom claims just aren't
unfolding as predicted. With time, more and more people are
noticing the widening gulf between global warming hype and reality,
and wondering whether a costly re-ordering of the economy is really
Just as $4.00 a gallon gas forestalled global warming cap and
trade legislation in 2008, the weakening economy may do the same in
2009 and possibly beyond. And it should, because the economic and
scientific rationale for this ill-advised policy is beginning to
collapse. As bad as the economic downturn may get, it would have a
silver lining if it prevents costly and ineffective global warming
measures from being imposed.
Lieberman is senior policy analyst in the Thomas A. Roe
Institute for Economic Policy Studies at The Heritage
Show references in this report
Lieberman, "The Lieberman-Warner Climate Change Act: A Solution
Worse Than the Problem," Heritage Foundation Backgrounder No. 2140,
June 2, 2008, p. 5.
Ibid., p. 4.
Ibid., Table 1.
Ibid., pp. 5-6.
Portia Mills and Mark Mills, "A Regulatory Burden: The Compliance
Dimension of Regulation Carbon Dioxide as a Pollutant," U.S.
Chamber of Commerce, September 8, 2008, at http://www.uschamber.com/assets/
David W. Kreutzer and Karen A. Campbell, "Carbon Dioxide Emission
Cuts: The Economic Costs Of The EPA's ANPR Regulations," Heritage
Foundation Center For Data Analysis report, October 29, 2008, pp.
United Nations Press Release, "UNFCC: Rising industrialized
countries emissions underscore urgent need for political action on
climate change at Poznan meeting," November 17, 2008, at http://unfccc.int
See, Benny Peiser, "Cooling on Global Warming," The Wall Street
Journal Europe, December 15, 2008, at http://online.wsj.com/article
M.L. Wigley et al., "The Kyoto Protocol: CO2, CH4 and Climate
Implications," Geophysical Research Letters, Vol. 25, No. 13
(1998), pp. 2285-2288.
U.S. Energy Information Administration, "International Energy
Outlook 2008," June 2008, chapter 7.
First appeared in Yale's "The Politic"
There is little doubt that legislation to address global warming will be very expensive. Nonetheless, many had thought it to be inevitable in 2009. President Obama supports it, as do most Congressional Democrats, who have expanded their majorities in the House and Senate. But the weakening economy has changed the political landscape nearly as much as the elections themselves, and it has reduced the prospects for major climate change action this year. If so, the respite would be a real silver lining to the economic downturn, as the so-called cap and trade measures currently under consideration are likely to do far more harm than good. Moreover, the recession should provide time for a serious reevaluation of the federal government’s flawed approach to the issue.
Energy & Environment Initiative of the Leadership for America Campaign
Senior Policy Analyst, Energy and Environment
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