Waxman’s Lower Standards Do Not Reduce Costs To Consumers

Posted on Fri 05/15/2009 by


By Nick Loris

In an attempt to win over the public, manufacturers and garner more Congressional support, House Energy and Commerce Committee chairman Henry Waxman reduced the stringency of the short-term emission cuts and requirements for a renewable portfolio standard.

The concessions, as reported by CQPolitics and the New York Times Greenwire, include:

• 17% carbon cuts by 2020 (instead of 20%), but later reductions do not change
• Allowances
o 35% of allowances to local electric distribution companies
o Trade-intensive industries, including pulp, paper, cement and steel,
also would get free credits — 15 percent starting in 2014 but phasing
out by 2 percent per year.(per NYT)
o “Some” allowances to auto industry for research on new technology
o Additional allowances to refineries pending – between 1 and 5 percent
• Renewable Portfolio Standard would drop to 15% by 2020, with another 5% from energy efficiency
o A 3% “Swinging Door” would allow states to meet RPS with 12-18
percent of renewables and the rest from efficiency
o Expands biomass definition and includes hydro built back as far as 1992
o Nuclear or CCS-coal plants would not count toward the baseline
• In 2025 President could impose carbon tariffs

In truth, these concessions should be read as redistributive policy that attempt to mask the economic costs of the bill. Unfortunately, even if government selects a few winners, it’s the consumer that still ends up on the losing side. The Heritage Foundation analysis of Waxman-Markey (before the concessions) raises energy prices by 55-90 percent. The higher energy prices push unemployment up by 844,000 jobs per year on average with peaks over 1.9 million. In aggregate, GDP drops by over $7 trillion. The next generation will inherit a federal debt pumped up by $33,000 per person. All of these costs accrue in the first 25 years of a 90-year program. A few near-term reductions will do little to change the economic damage.

And if it’s even possible for the environmental benefits to be more negligible than what they already were, these concessions only make the environmental target harder to reach. Climatologist Chip Knappenberger found:

“By the year 2050, the “clean” version reduces projected global temperatures by 0.044ºC (or ~3% less than the rise without the legislation), the “dirty” version gets you about half of that, or 0.022ºC (~1.5% less), and the “dirtier” version saves half of that again, or 0.011ºC (<1% less). By century’s end, you don’t do much better–the temperature reduction amounts to, respectively, 0.112ºC (0.20ºF), 0.046ºC (0.08ºF), and 0.013ºC (0.02ºF).”

Policymakers nor the public should fall for a short-term softening of the bill because it will be the consumers who suffer in both the near and the long-term.

Contributing Author Nick Loris writes at The Heritage Foundation and he is a Research Assistant at The Heritage Foundation’s Roe Institute for Economic Policy Studies.

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