Cap and Trade for Climate Change – Pacific Research Institute

Cap and Trade for Climate Change

Rightly or wrongly, Global Warming offers disaster for our planet. Countering it has become a consuming concern. Emissions of greenhouse gases (GHG) focus on carbon dioxide. “A reduction in carbon emissions has become an end in itself,” observes Bjorn Lomborg, whose Copenhagen Consensus found 36 better ways to accomplish the goal.

Carbon dioxide is the by-product of fossil fuel, chiefly oil, which provides 85% of our energy. European attempts to decrease CO2 have failed while being extremely expensive. Nearly every European country has higher emissions today than when the Kyoto Protocol which started it was signed in 1997. Cap and Trade (C&T), a favored approach, is “the biggest income tax on industry yet devised,” in the opinion of Senator James Ihhofe (R, Oklahoma). Nevertheless some influential firms welcome it.

“Cap” would put a lid on the emissions each plant can produce through “allowances” distributed by government or some other authority. “Trade” is to enable firms that have more allowances than they need, to sell the excess to firms that do not have enough. Periodically, the total GHG emissions would in some way be lowered, and the amount of energy available to run the economy lowered correspondingly.

There are C&T bills which Senator Inhofe says are “all economic pain and no climate gain.” They will raise the price of electricity by 35% to 65% by 2020. Many firms will have to close, meaning a loss of jobs of 1.5 to 3.4 million by 2020, according to the Charles River Associates International. The Congressional Budget Office says a tax on carbon would be more efficacious. Senator Inhofe says the Lieberman-Warner bill is the biggest tax bill in U.S. history.

The Lieberman-Warner bill, S2191, is based on an estimate that we will reduce GHG emissions by 60% by the year 2050–80% say the presidential aspirants. The last time we emitted that amount, one billion metric tons of CO2, was in 1911. We had a population then of 92 million. Our population will be 420 million in 2050.

If we cut emissions by 80%, that would allow 2.5 metric tons per person per year. The only nations today that burn that little are Belize , Mauritius , Jordan , Haiti , and Somalia . Even countries that generate their electricity by non-fossil fuel, France (nuclear power) and Switzerland (hydro power), emit 6.5 metric tons per person. The average U.S. residence today emits 11.4 tons of CO2. Reduced to 2050 goals, we would emit 1.5 tons, not enough to run the hot-water heater. Overshooting the goal by 40% is transportation, even if every person in the U.S drove a Toyota Prius, according to Steven Hayward.

Such, such are the joys of the standard-of-living cost to reap the benefit of reducing Global Warming by 0.07 degrees centigrade—less than one-tenth of a degree–an amount too small to verify.

Nevertheless, C&T has support from the Who’s Who in industry. In January, 2007, ten firms (now 27) and four environmental organizations formed the U.S. Climate Action Partnership (USCAP). Regulations hurt some and help some. USCAP welcomes regulations for buying and selling GHG permits (called “allowances”) and auctions. USCAP proposes mandatory reductions of GHG emissions from large stationery sources, transportation, and heavy use of energy in commercial and residential buildings.

USCAP’s initial members included GE, ALCOA, DuPont, Caterpillar, and the environmental organizations Environmental Defense (Fund), Natural Resources Defense Council, the Pew Center on Global Climate Change, and the World Resources Institute. Not all environmental organizations agree. In California , 25 have lobbied the California government in opposition.

The U.S. Chamber of Commerce joined USPAC but not the National Association of Manufacturers. Citigroup wrote a research brief on opportunities for investment, according to Timothy P. Carney in his June essay, “United States Climate Action Partnership,” a Capital Research Center publication.

What has the USCAP been up to? To design its program and lobby Congress and the government, it has hired two firms. One is William Ruckelshaus’s Meridian Institute, a firm that says on its website it gets “decision-makers and diverse stakeholders [to] solve some of society’s most contentious public policy issues.” Mr. Ruckelshaus, the first Administrator of EPA, on the appeal of his friend the Environmental Defense Fund, overruled his EPA judge and banned DDT, leading (still) to the deaths of millions from malaria.

Senator Barbara Boxer was thrilled to see USCAP, remarking, “There are just a few moments in history when all sides come together for the common good . . . to avoid a global warming crisis.” The first bill heard in her Environment and Public Works Committee had few supporters. Mrs. Boxer had only 36 of her troops standing with her. Commented The Wall Street Journal, the environmentalists were “stunned that their Global Warming agenda is in collapse,” adding, “The green groups now look as politically intimidating as the skinny kid on the beach who gets sand kicked in his face.”

Not in collapse is the Lieberman-Warner bill named “ America ’s Climate Security Act of 2007.” It is much like the mandates USCAP want. It provides that the Feds hand out allowances to industry, state governments, “and agencies.” A new Climate Change Credit Corporation will auction off additional allowances.

S2191 instructs the EPA and Department of Agriculture to create a system to take account of GHG offsets. “Plant a tree, earn an offset.” What will be included? How will the allowances be distributed?

Some say we must act now to avoid a crisis. But there is no action in the bill, observes Senator Inhofe. It does nothing about nuclear energy, says nothing to increase use of clean coal or to increase refinery capacity or to increase electricity-generation or transmission.

By Natalie Sirkin

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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