Unlike the pesky
cicadas that have the courtesy to annoy the nation's capital only
once every seventeen years, misguided legislative proposals are an
everyday occurrence on Capitol Hill. The periodic reemergence of a
certain piece of irresponsible climate change legislation is no
McCain (R-AZ) and Joseph Lieberman (D-CT) may try to attach an
amended version of last year's Climate Stewardship Act of 2003 (S.
139) to the class-action lawsuit bill that is being debated in the
Senate this week or to another legislative vehicle. Studies show
that this energy-suppressing proposal, whether in its original
version or in its amended form, would have an adverse impact on the
nation's economy. It would increase the cost of energy for
consumers, impact job creation, and slow the nation's economic
growth. For these reasons alone, Congress should continue to reject
attempts to impose caps on greenhouse gas emissions.
introduced, the Climate Stewardship Act would cap greenhouse gas
emissions in two phases. Phase I would require a reduction to 2000
levels by 2010, and Phase II would require a reduction of emissions
to 1990 levels by 2016. These phases are similar to the reductions
called for under the fatally flawed Kyoto Protocol, which the
Clinton Administration agreed to in 1998 despite the unanimous
opposition of the Senate. Because of that opposition, Kyoto was
never submitted to the Senate for ratification-a step necessary for
it to take effect. Given this resistance to Kyoto and the adverse
impact that its emissions cap would have on the economy, the bill's
sponsors have since removed Phase II. Even this change, however,
was not enough to secure passage; it was defeated last October in
the Senate by a vote of 43 to 55.
The U.S. Energy
Information Administration (EIA), an independent analytical and
statistical agency in the Department of Energy, recently completed
an analysis of the Climate Stewardship amendment at the request of
Senator Landrieu (D-La.). EIA found that Phase I alone would costly
would increase by 9 percent in 2010 and by 19 percent in
prices in the electric-power and industrial sector would increase
by 21 percent in 2010 and 58 percent in 2025; and
prices would increase by 35 percent in 2025.
River Associates (CRA), an economics, finance, and business
analyzed the proposal (PDF link) and found that imposing an
emissions cap equal to 2000-level emissions in perpetuity would
increase the cost of residential electricity by over 19 percent and
raise gasoline prices 14 percent by 2020. In addition, natural gas
and electricity prices for industry would increase by 32 percent
and 43 percent, respectively, by 2020.
The CRA study also
shows that the purchasing power of the typical household (2.6
members and an income of $49,000) would erode by over $600 in 2010
and by $1,000 in 2020.
however, CRA notes that the cost burdens associated with this
proposal would fall most heavily on the poor and elderly. CRA data
show that the poorest 20 percent of households would have to bear
energy cost increases 64 percent larger than the highest income
households. The elderly would have to bear cost increases 15
percent higher than those under age 65.
projects that higher energy prices would cost 39,000 jobs by 2010
and 190,000 jobs by 2020.
projects that all industries would suffer losses in production. For
example, coal production, electricity generation, and oil refining
would decline by 57 percent, 7.9 percent, and 8.8 percent,
respectively, by 2020. Non-energy sectors that are dependent on
energy, chemicals, and steel would be the hardest hit. CRA
estimates that, collectively, production from energy-intensive
industries would decline $70 to $160 billion by 2020.
To be clear, all
these estimates assume the McCain/Lieberman proposal's Phase I cap.
The economic impacts would increase in severity if any follow-on
emissions caps, such as the Phase II cap included in the original
version of the Climate Stewardship Act, were implemented.
McCain/Lieberman proposal was irresponsible policy when it was
introduced as the Climate Stewardship Act of 2003 and remains so in
its amended form. The Senate should send a strong signal to the
proponents of this energy-suppressing legislation by once again
soundly rejecting unwise and costly attempts to impose caps on
greenhouse gas emissions.
Charli Coon is
Senior Policy Analyst in the Thomas A. Roe Institute for Economic
Policy Studies at The Heritage Foundation.