This is completely misleading. It is true that the vast majority of the surveyed economists believe that climate change poses a threat to the economy. However, this alone doesn’t mean that their work endorses the pending legislation. In fact, we will show that many of the responses in the survey underscore that Congress’ proposed “solutions” to climate change violate the recommendations of even those economists who are very concerned about climate change.

The Existence of a Threat Alone Doesn’t Justify Any Government “Solution”

The most-hyped result from the survey was the fact that 84 percent of the surveyed economists agreed with this statement: “The environmental effects of greenhouse-gas emissions, as described by leading scientific experts, create significant risks to important sectors of the United States and global economy.”

Already we see that the question is loaded; a more neutral question would have been, “Do you think greenhouse-gas emissions create significant risks to the economy?” There are many economists who have expressed skepticism about the computer models and techniques used to generate some of the scarier projections. But with the phrasing of the question, they were technically being asked to take the climate models at face value, and assess what the impact of their projections would be on the economy.

But that’s a minor quibble. The real problem with the hype placed on this particular result, is that it does not follow that the Waxman-Markey or Kerry-Boxer bills are appropriate to dealing with this potential risk. For an analogy, if we surveyed doctors and asked, “Is there a significant risk to the public from H1N1?” presumably a large percentage would say, “Yes.” If the Obama Administration then proposed vaccinating every American three times a month for the next 20 years, that would clearly be a waste of resources and detrimental to public health.

The same is true with the threat of climate change. As we will show, the pending Congressional legislation actually violates many of the recommendations of the economists in the survey. Yet one would never get that impression from reading the NYT coverage, or story in USA Today.

Surveyed Economists Favor “Market-Based” Approach and Auctioned Allowances

Another completely misleading result from the survey shows that an overwhelming 91.6 percent of the respondents favored a “market-based” approach to curbing greenhouse gas emissions. In the news stories linked above, as well as the Executive Summary of the survey itself, this statistic is offered as apparent endorsement of the cap-and-trade legislation currently being debated in Congress.

On the contrary, the economists endorsement of “market-based” approaches really shows how inefficient the pending legislation is. By “market-based” approach, the economists mean that the government should place a price penalty on carbon dioxide emissions, either through a cap-and-trade system or a straightforward carbon tax. And then…the government should mind its own business. In particular, policymakers should not try to micromanage the particular ways that business and consumers scale back their emissions, but rather the (augmented) profit and loss system will lead to the most efficient response to the new incentives. As the study itself explains:

Nearly all respondents—92%—also agreed or strongly agreed that market-based mechanisms, as opposed to command-and-control approaches, are the preferred way to cut greenhouse gas emissions and place a price on carbon. As such, most economists would support the cap-and-trade structure proposed by the main legislative options now pending before Congress. [Emphasis added]

Yet contrary to the non sequitur in the quote above, if a straightforward “market-based” approach is what the expert economists favor—by an overwhelming majority—then the economists would likely reject the monstrous hunks of legislation that passed the House and are being debated in the Senate. We at IER have already shown the tremendous thicket of new regulations contained in the House-passed Waxman-Markey bill, besides its cap-and-trade system. At best, only one half of Waxman-Markey could even be called cap-and-trade, leaving an additional 700 pages of inefficient regulations. The 91.6 percent of economists who favored a “market-based” approach were rejecting the top-down central planning contained in Waxman-Markey and Kerry-Boxer.

Speaking of cap-and-trade, the IPI survey also found that 80.6 percent of respondents favored auctioning emission allowances rather than handing them to favored groups for free. Presumably then these economists would join with IER in condemning this thinly veiled transfer of an enormous amount of wealth from low- and middle-class energy consumers into the pockets of politically-connected shareholders.

What the Media Hype Didn’t Report

We have seen that the two most-hyped results of the survey actually do not support the pending legislation, and if anything actually undercut it. What’s interesting is that if one looks at pages 18-19 of the actual survey [.pdf], one learns:

The survey asked what percentage of benefits from emissions reduction would accrue to the United States. The average response was 7.7%, and the median was 4%….Given the global extent of the problem, each individual country has an incentive to “free ride” on the efforts of others—it is important for all countries to act to overcome this incentive or else appropriate controls will not be put in place.

The lay person who simply reads the news coverage or Executive Summary would be stunned by the above concession. Many economists support a reduction in greenhouse gas emissions because they calculate that the global benefits will outweigh the global costs. But as the above quotation makes crystal clear, if the U.S. restrains its own emissions while other major governments do not, then the impact on the U.S. economy—which the CBO estimates could be as high as 3.4 percent of GDP by 2050—will result in benefits that will accrue largely to foreigners.

Of course, there is nothing wrong with foreign aid per se; Americans are quite generous with their wealth. Furthermore, many people believe that the Western countries ought to bear the lion’s share of the pain from emissions cuts, because they historically benefited from plentiful energy supplies in the form of fossil fuels. Even so, average Americans are being misled when they believe the pending legislation will benefit the U.S. economy on net. Even according to the “consensus” models, it will not benefit if the U.S. acts unilaterally.

Conclusion

The media blitz surrounding the new IPI survey tells Americans that economists as well as climate scientists support government intervention into the energy sector. Yet a little digging shows that if anything, the economic consensus rejects the particular legislation pending in Congress. Just because many experts agree there is a problem doesn’t automatically mean Congress has the solution.

Not true, as you can see here.

This week Senator John Kerry, the lead author of the legislation, told the Senate Finance Committee that “the reason” we need to pass his cap-and-trade energy tax is that “over the last eight years, emissions in the United States of America in greenhouse gases went up four times faster than in the 1990s.”  Also not true.  In fact, he’s off by a factor of 32.

As the video shows, greenhouse gas emissions increased far slower in the 2000s than the 1990s. According to data from the Energy Information Administration,[1] U.S. carbon dioxide emissions increased by 15.14% between 1990 and 1999, but from 2001 to 2008 carbon dioxide emissions only increased by 1.88%. If Senator Kerry were correct, U.S. carbon dioxide emissions would have increased by 60.5% over the last 8 years, but they only increased by 1.88%.  Senator Kerry overestimated U.S. emissions by a factor of 32.

These are the authors of the Kerry-Boxer cap-and-trade energy tax legislation.  If our leaders can’t stick to the basic facts to support their argument for a national energy tax, and the lead author of the bill is this far off the mark on “the reason” Congress needs to pass it, Americans might reasonably question the validity of their estimates on how much the bill will cost them and our nation’s already-struggling economy.

Even more troubling, Senator Lindsey Graham is now working with Senator Kerry on a “compromise” in which Senators’ would accept the cap-and-trade plan in exchange for “opening new areas for offshore drilling.”  This would have been a bad compromise last year, but given the fact that the Outer Continental Shelf (OCS) is now open—and has been since Congress allowed its ban on offshore drilling to expire on October 1, 2008—it appears to be an even worse compromise this year.

If the compromise is anything like the “Gang of 10” plan offered last year in the months before the Congressional ban on drilling in 85 percent of the OCS was set to expire, the only thing we’d be compromising is the progress we’ve already made. That’s because the Gang of 10 plan would have created a permanent ban on drilling in 78 percent of our offshore areas—areas that are now open.

But at the end of the day, it doesn’t matter what the compromise may be.  The long-term costs cap-and-trade legislation would inflict on our economy and our way of life would be so devastating, that no compromise – offshore drilling or anything else – would justify its passage.

Washington, DC – Today, the U.S. Senate Environment and Public Works Committee passed a global warming bill. Following the panel’s vote, Thomas J. Pyle, president of the non-partisan, pro-market Institute for Energy Research (IER), issued this statement:

“The winners today are rent-seeking corporations, Washington special interests and our global competitors, especially China. The timing of this vote – which will weaken America’s ability to compete in the global economy – is particularly ironic, given that just yesterday a U.S. global warming envoy official told Congress that ‘No country holds the fate of the Earth in its hands more than China.’

“Enacting burdensome policies – such as cap-and-trade – will drive energy prices up and make it more difficult to create jobs, wealth and prosperity here in the U.S. China’s hand, however, will only grow stronger, as they continue to aggressively access and develop all forms of energy in their country and across the world. This, in large part, is what has enabled their enormous economic growth and expansion.

“While the members of this committee who voted to advance this legislation may attempt to downplay their vote to increase energy costs for American families, seniors and small businesses as an inside-the-beltway procedural motion, the fact remains that job-killing, carbon regulating legislation has cleared a major hurtle and is a major step closer to becoming law.”

For additional information, please contact Patrick Creighton, 202-621-2947, or Laura Henderson, 202-621-2951.

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Elmendorf’s testimony was in response to a revision of CBO’s original report on the cost of the Waxman-Markey bill. When the original report came out, IER showed that CBO’s own numbers demonstrated that the economic costs of Waxman-Markey’s cap-and-trade scheme far outweighed its benefits to American citizens, and arguably even to the world as a whole. In the present post, we explain why Elmendorf’s three key points are misleading. Elmendorf calls hundreds of billions of dollars in lost future economic growth a “modest” reduction, he obfuscates by focusing on purchasing power instead of on the reduction in total income, and contrary to economic theory, assumes that low- and middle-income families will benefit from free allowances handed out to utilities. By simply stressing different aspects of the same underlying CBO analysis, one could have painted a much bleaker picture of the costs of cap-and-trade than Elmendorf chose to convey.

Writing off Billions of Dollars in Lost Future Economic Growth as “Modest”

The first trick Elmendorf deploys is to dismiss reductions in GDP as “modest” because they won’t occur until Americans are wealthier than they are today:

Reducing the risk of climate change would come at some cost to the economy. For example, the Congressional Budget Office…concludes that the cap-and-trade provisions of H.R. 2454…would reduce gross domestic product (GDP) below what it would otherwise have been—by roughly ¼ percent to ¾ percent in 2020 and by between 1 percent and 3½ percent in 2050. By way of comparison, CBO projects that real (inflation-adjusted) GDP will be roughly two and a half times as large in 2050 as it is today, so those changes would be comparatively modest.

Although the CBO director brushes it off, a potential cost of 3.5 percent of total economic output is enormous. In 2008, US GDP was $14.4 trillion. The high-end cost estimate of 3.5 percent works out to $504 billion. Yes, it’s certainly true that if you asked people back in 1970 if 3.5 percent of GDP forty years in their future was a big deal, they probably would have said “Not really.” Yet the people in 2008 would certainly have been upset if $504 billion were sucked out of the economy because of a program implemented forty years earlier.

While CBO calls a 1 percent to 3.5 percent reduction in GDP by 2050 a “modest” cost, what about the benefits? The true irony here is that Elmendorf’s testimony provides an estimate of the cost of global warming. CBO argues that “a relatively pessimistic estimate for the loss in projected real gross domestic product [GDP] is about 3 percent…by [the year] 2100”. So if Elmendorf is allowed to blow off 1 percent to 3.5 percent in GDP because people will be so much richer by 2050, why are we rushing through legislation to avert potential climate change that the same CBO predicts might cost 3 percent of GDP at the end of the century? Won’t Americans be really wealthy by 2100?

Focusing on Consumption Purchasing Power Rather Than Total Income

After assuring the senators that reductions in GDP were modest, Elmendorf then changed the measuring rod:

In the models that CBO reviewed, the long-run cost to households would be smaller than the changes in GDP. Projected GDP impacts include declines in investment, which only gradually translate into reduced household consumption.

This statement is technically true but it is very misleading. Suppose a household currently enjoys a take-home income of $100,000, out of which they put $10,000 into funding retirement and the kids’ college tuition, while the other $90,000 they spend on the mortgage, dining out, clothes, gasoline, and other household necessities. The politicians come along and propose a new tax that will grab an extra $5,000 a year, leaving the family with a new after-tax income of $95,000.

Now most people would think, “Wow, I’m $5,000 a year poorer.” But the apologists for the tax hike could argue, “Actually you’re not really $5,000 poorer, in terms of your lifestyle. You won’t cut out your spending on groceries and food by the full $5,000. Because of your lower income, you will reduce your savings to $9,000 a year, and your other spending down to $86,000 a year. So really the hit to your household’s consumption is only $4,000 per year.”

Would anybody buy that argument? Of course not. Income is income. The “long-run cost to households” will certainly be affected by declines in investment spending, which is counted in GDP. By focusing on a decline in “purchasing power” of 1.2 percent for households by 2050—rather than their estimate of 1.1 percent to 3.5 percent of lost GDP—the CBO is effectively sweeping half the impact under the rug.

Reporting Allowance “Rebates,” Not Gross Compliance Cost

The last trick we’ll note is that the CBO analysis simply takes the government at its word that low-and middle-income families will benefit from the free allowances that will be handed to utilities under the provisions of Waxman-Markey, even though this flies in the face of standard economic theory. As a recent IER study showed, Congress plans on using allowance handouts in order to transfer money from consumers (through higher prices) into the pockets of special interests.

The reader may be interested to see the CBO’s estimates of the actual hike in household costs from Waxman-Markey’s cap-and-trade scheme, before adding in the free allowance handouts:

As the first column makes clear, middle class families are expected to suffer a hit of more than $1,000 per year in higher prices. (And remember, this figure is the one that has already been cut in half using the total output vs. consumption trick explained above.) Whatever happened to “a postage stamp a day”? Does the CBO know something about the Postal Service’s intentions that we don’t?

Conclusion

During a recent hearing, Elmendorf made clear there were substantial costs to cap-and-trade. According to the Washington Post he said:

“The shifts will be significant,” the CBO director said. “We want to leave no misunderstanding that aggregate performance—the fact that jobs turn up somewhere else for some people—does not mean that there are not substantial costs borne by people, communities, firms in affected industries and affected areas. You saw that in manufacturing, and we would see that in response to changes that this legislation would produce.”

Even Elmendorf agrees there are substantial costs to cap-and-trade. And as we have shown, he and the CBO are still underestimating the costs.

Unlike previous versions, this one spells out which groups are politically-favored enough to receive preferential treatment in the form of free carbon dioxide emissions allowances. This draft also includes “Increased Investments in Energy Efficiency and Renewable Energy.” In other words, increased subsidies for politically-favored forms of energy. The premise of this section of the bill seems to be that the American people need the federal government to tell them how to use energy cost-effectively.

Like Waxman-Markey, this bill is shaping up to be incredibly costly and incredibly intrusive into all aspects our energy use.

WASHINGTON – In advance of Wednesday’s Senate Energy and Natural Resources Committee hearing on the economic consequences of climate change legislation, the Institute for Energy Research (IER) today released an analysis entitled ‘The Other Half of Waxman-Markey: An Examination of the Non-Cap-and-Trade Provisions.’ As the title suggests, the report identifies and analyzes several of the provisions included in the House climate bill unrelated to cap-and-trade, but taken on the whole, potentially just as harmful to the U.S. economy as the components of the bill attracting all the headlines.

IER President Thomas J. Pyle released the following statement about the new study:

“Though nearly all of the debate surrounding Waxman-Markey and its new Senate counterpart, Kerry-Boxer, has centered on cap-and-trade, there is much more to this legislation than just that one policy. This bill is chock-full of provisions that mandate everything from the kind of light bulbs we can use in our swimming pools to the amount of electricity that utilities will be forced to provide from politically correct, unreliable, and unaffordable sources.

“While the bill boldly announces itself ready and willing to regulate fundamental aspects of Americans’ daily lives, harder to find is any explanation of how it will actually improve our environment, or enhance the quality of life of those who live within it. One would’ve thought those considerations could have found their way into a nearly 700-page bill. But they did not, and it’s hard to imagine they will moving forward.”

More information on the study:

• Fact Sheet: Highlights of the Rest of Waxman-Markey
• Summary: A Brief Overview of Waxman-Markey’s Non-Cap-and-Trade Provisions
• Study: The Other Half of Waxman-Markey: An Examination of the Non-Cap-and-Trade Provisions

For additional information, please contact Patrick Creighton, 202-621-2947, or Laura Henderson, 202-621-2951.

#####

• Dr. Michael’s full study is available here.
• The following is a fact sheet to accompany Dr. Michaels’ study (PDF version here).

Notable Provisions in Waxman-Markey:

• Mandate that utilities provide 20 percent of electricity from qualified renewables by 2020, up from about 2.8 percent today[1] (Sec. 101): The bill requires utilities to obtain at least 6 percent of their electricity from sources defined as renewable by 2012, 9.5 percent by 2014 and 20 percent by 2020 (some portion may come from efficiency-related savings).And if those mandates aren’t strict enough, Waxman-Markey also:
  • Defines wood and plant waste from federal lands as non renewable, while the same material, if found on certain non-federal lands, is renewable. (Sec.126)
  • States that new hydroelectric power from the U.S. is renewable; hydroelectric power from Canada is not.[2]
• Establish a new $1 billion annual tax on electricity from coal and natural gas-fired power plants (Sec. 114): These tax proceeds are given to a nonprofit corporation to “accelerate the commercial availability of carbon dioxide capture and storage.” The Pew Center on Global Climate Change estimates this technology will increase coal-fired electricity costs by 40 to 70 percent.[3]
• Provide assistance to the many workers who will lose their jobs as a result of the bill’s economically destructive provisions (Sec. 421–424).
• Micromanage energy efficiency standards for lighting and appliances (Sec. 211–212), including swimming pool lights, portable lights, decorative gas lighting systems, theme park lights, stage lights, lights for artwork, water dispensers, hot food holding cabinets, hot tubs and more.
• Establish a new $30 billion revolving loan fund to subsidize wind turbines, solar energy, fuel cells, batteries, biomass equipment and other energy sources (Sec. 246).
• Create a Clean Energy Deployment Administration (CEDA) with $7.5 billion in Treasury “Green Bonds” (Sec. 182): CEDA will use taxpayer dollars to invest in energy technologies that private investors consider too risky. Waxman-Markey does not explain why the federal government, which has no history of investing wisely, will make better investments than private investors.
• Require utilities to develop large scale plans for electric vehicles (Sec. 121) and increase the ceiling on loans to auto manufactures to build electric cars (Sec. 125). The bill also allows the Secretary of Transportation to require automobile manufactures to produce flex-fuel vehicles (Sec. 127), and even authorizes $350 million for a “Cash for Clunkers” program for electric motors (Sec. 245).
• Continue to allow EPA to regulate greenhouse gases using criteria other than global climate change (Sec. 831–835). Waxman-Markey prohibits EPA from regulating greenhouse gases based on their effect on global climate change, but does not prohibit EPA from regulating greenhouse gases on any other basis, such as ocean acidification.
• Stall EPA’s efforts to determine the complete lifecycle greenhouse gas emissions of ethanol (Sec. 551). Though EPA has been working to determine the lifecycle greenhouse gas emissions from the production of ethanol, the bill stalls that effort. Recent science shows the lifecycle greenhouse gas emissions of ethanol may be greater than gasoline.[4]
• Replace local and state building codes with a federal building code (Sec. 201). Apparently, state and local governments cannot be trusted to make their own decisions about what buildings to allow in their jurisdiction, so the federal government will require more expensive buildings across America. This is needless additional regulation, as weather and storm effects vary throughout the US.
• Create a federal grant program to help electric utilities plant trees (Sec. 205).
• Create an independent consumer advocacy office within FERC that is run by a political appointee and will not answer to the Commissioners (Sec. 198). This section also removes the independence of the office of Administrative Litigation and places it under a political appointee.
• Establish a “National Climate Adaptation Program,” which empowers federal zoning of land and the oceans under the guise of climate change (Sec. 471–482).
• Require the President to impose tariffs on imports from counties that do not reduce their emissions by 2020 (767–768).

Waxman-Markey does not include:

• Any provisions that will increase the supply of energy without increasing prices, subsidies and costs to taxpayers.
• Any provisions to accelerate access to billions of barrels of oil and natural gas on the outer continental shelf or the over 2 trillion barrels of oil in oil shale.

[1] See Institute for Energy Research, How Much of Your State’s Electricity Meets Congress’s Definition of Carbon-free “Renewable” Energy?, http://www.instituteforenergyresearch.org/2009/05/02/does-your-electricity-come-from-congress-approved-sources/. This requirement only applies to investor-owned utilities, not municipal utilities which sell 25 percent of the nation’s electricity. Waxman-Markey defines renewable hydro as hydro built on or after January 1, 1988. The vast majority of hydro in the United States was in place before 1988. It is not clear how much hydropower was brought online after 1988, so the 2.8 percent figure might slightly underestimate the amount of electricity which qualifies as renewable under Waxman-Markey.

[2] See Sec. 101. "Qualified hydropower" under the standard must be from a facility approved by FERC, which eliminates relatively plentiful Canadian imports from qualifying under the RPS.

[3] Vello A. Kuuskraa, A Program to Accelerate the Deployment of CO2 Capture and Storage (CCS): Rationale, Objectives, and Costs, report by Advanced Resources International, Inc. for the Pew Center on Global Climate Change, October 2007 at 14 and 18-25. http://www.pewclimate.org/docUploads/CCS-Deployment.pdf.

[4] Jason Hill et al, Climate Change and Health Costs of Air Emissions from Biofuels and Gasoline," Proceedings of the National Academy of Sciences 106 (Feb. 10, 2009), 2077-2082.

1. It appears the Senators do not trust cap-and-trade to produce the result they want. If they did, the bill would not need to increase hundreds of pages of additional (and costly) energy regulations.
2. In spite of their claim that this bill will create jobs, portions of the bill suggest the Senators understand that their legislation will be costly for Americans. This is why the bill contains subsidies for people who lose their jobs as a result of the bill’s provisions.
3. It appears that the Senators want the Environmental Protection Agency (EPA) to regulate greenhouse gases using the Clean Air Act. Unlike the Waxman-Markey bill, the Boxer-Kerry permits EPA to move forward with regulations.[1] Even the Washington Post believes that it is not efficient for EPA to regulate greenhouse gases using the Clean Air Act.
4. A recent study shows that the Waxman-Markey bill will redistribute $14 billion per year from the nation’s poorest citizens to the nation’s richest citizen. Because the Boxer-Kerry bill is functionally similar to Waxman-Markey, the Boxer-Kerry bill will benefit the rich at the expense of the poor.

A couple other interesting features:

• The bill’s summary does not describe the bill as “cap-and-trade” bill. Instead, the cap-and-trade provisions are called “pollution reduction and investment.” Apparently, Americans are seeing cap-and-trade for what it is—a tax.
• The bill’s summary only mentions “greenhouse gases” once and does not mention carbon dioxide. Instead, the summary describes these emissions as “carbon pollution.” This is a misnomer, as New York Times reporter Andrew Revkin has pointed out. Not all greenhouse gases contain carbon (nitrous oxide and sulfur hexafluoride for example) and not all emissions which contain carbon are greenhouse gases (carbon monoxide is an example). It would seem that Senators Boxer and Kerry prefer a sound bite to accurately portraying the emissions they seek to regulate.

[1] As we have noted before, Waxman-Markey’s attempt to limit EPA’s ability to regulate greenhouse gases is ineffectual. The limitation only prohibits EPA from regulating greenhouse gases based on the impact on “global climate change.” (Sec. 831-835) That language does not prohibit EPA from regulating carbon dioxide based on non-global climate change concerns such as ocean acidification. This is especially telling because there are a number of sections in Waxman-Markey where climate change and ocean acidification are coupled (see e.g. Sec. 471).

Apparently, Senators Boxer and Kerry understand the difficulties they will face in passing a cap-and-trade bill this year. It seems that, in order to create leverage to secure more votes, the drafts do not completely spell out how the carbon dioxide allowances will be allocated. Instead the draft bills contain many placeholders. The following outlines the placeholders in the first bill leaked today:

SEC. 101. DISTRIBUTION OF ALLOWANCES FOR INVESTMENT IN CLEAN VEHICLES.

[PLACEHOLDER FOR AUTHORIZING LANGUAGE]

SEC. 124. DISTRIBUTION OF ALLOWANCES FOR COMMERCIAL DEPLOYMENT OF CARBON CAPTURE AND SEQUESTRATION.

[PLACEHOLDER FOR AUTHORIZING LANGUAGE]

SEC. 131. DISTRIBUTION OF ALLOWANCES TO STATES.

[PLACEHOLDER FOR AUTHORIZING LANGUAGE]

SEC. 201. ENERGY INNOVATION HUBS.

[PLACEHOLDER FOR AUTHORIZING LANGUAGE]

SEC. 202. ADVANCED ENERGY RESEARCH.

[PLACEHOLDER FOR AUTHORIZING LANGUAGE]

SEC. 454. ENERGY EFFICIENCY IN BUILDING CODES.

[PLACEHOLDER FOR TEXT PROVIDING ALLOCATION FOR PROGRAM UNDER SECTION 174]

SEC. 455. BUILDING RETROFIT PROGRAM.

[PLACEHOLDER FOR TEXT PROVIDING ALLOCATION FOR PROGRAM UNDER SECTION 175]

SEC. 456. FLOOD PREVENTION.

[PLACEHOLDER FOR TEXT PROVIDING ALLOCATION FOR PROGRAM UNDER SECTION 181]

SEC. 457. WILDFIRE.

PLACEHOLDER FOR TEXT PROVIDING ALLOCATION FOR PROGRAM UNDER SECTION 182]

SEC. 460. GREEN JOBS AND WORKER TRANSITION.

[PLACEHOLDER FOR TEXT PROVIDING ALLOCATION FOR PROGRAM UNDER SUBTITLE B OF TITLE III or for ENERGY EFFICIENCY AND RENEWABLE ENERGY WORKER TRAINING FUND UNDER SECTION 322]

SEC. 461. NATIONAL CLIMATE CHANGE ADAPTATION PROGRAM.

[PLACEHOLDER FOR TEXT PROVIDING ALLOCATION FOR PROGRAM UNDER SECTION 351]

SEC. 462. CLIMATE CHANGE HEALTH PROTECTION AND PROMOTION FUND.

[PLACEHOLDER FOR TEXT PROVIDING ALLOCATION FOR PROGRAM UNDER SECTION 367]

SEC. 463. CLIMATE CHANGE SAFEGUARDS FOR NATURAL RESOURCES CONSERVATION.

[PLACEHOLDER FOR TEXT PROVISING ALLOCATION FOR PROGRAM UNDER SUBPART C OF PART 1 OF SUBTITLE E OF TITLE III (section  371 et seq.)]

SEC. 464. NATURAL RESOURCES CLIMATE CHANGE ADAPTATION FUND.

PLACEHOLDER FOR TEXT PROVISING ALLOCATION FOR PROGRAM UNDER SECTION 380]

SEC. 465. INVESTMENT IN ENERGY EFFICIENCY AND RENEWABLE ENERGY.

PLACEHOLDER FOR TEXT PROVISING ALLOCATION FOR PROGRAMS UNDER SUBSECTIONS (a)(8), (b)(6), and (b)(7) of SECTION 782, and SECTION 788, of the Clean Air Act (as added by SECTION 411)]

Subtitle D—International Climate Change Program

Sec. 341.

TO BE SUPPLIED.

SEC. 2. FINDINGS.

TO BE SUPPLIED

SEC. 142. NUCLEAR WASTE RESEARCH AND DEVELOPMENT.

TO BE SUPPLIED

SEC. 173. ADVANCED BIOFUELS.

TO BE SUPPLIED

SEC. 181. FLOOD PREVENTION.

TO BE SUPPLIED

SEC. 790. ENERGY REFUND PROGRAM.

TO BE SUPPLIED

Subtitle D—International Climate Change Program

SEC. 341.

TO BE SUPPLIED.

SEC. 788. CLIMATE CHANGE CONSUMER REBATES.

TO BE SUPPLIED

After the first draft bill was leaked, and appeared in a story in Greenwire, an updated draft was leaked. This second draft did not contain as many placeholders as the first, instead it gives the EPA Administrator discretion to allocate many of the allowances. This still gives Senators Boxer and Kerry bargaining power to allocate allowances to politically preferred groups.

But it also raises an important question—if Congress needs to act to limit the damage of EPA regulating carbon dioxide under the Clean Air Act, how is the second Boxer-Kerry draft an improvement over EPA regulation? This is especially important because the Boxer-Kerry draft does not limit EPA authority to regulate greenhouse gases using the Clean Air Act.[1]

Who Benefits From Free Emission Allowances? (PDF 358 KB)

WASHINGTON – With Sens. Barbara Boxer (D-Calif.) and John Kerry (D-Mass.) expected to reveal a draft of the Senate’s climate bill this week, free-market think tank Institute for Energy Research (IER) released a new analysis today outlining how cap-and-trade would precipitate a financial windfall for well-connected special interests and politically-favored companies.  The study, entitled “Who Benefits from Free Emission Allowances? An Economic Analysis of the Waxman-Markey Cap-and-Trade,” details how shareholders, not ratepayers, will be the primary beneficiaries of cap-and-trade’s largess. The analysis also outlines the significant wealth-transfer that cap-and-trade would initiate – a $14 billion redistribution of resources from the nation’s poorest citizens to the nation’s wealthiest citizens.

The study’s lead author, Andrew Chamberlain, issued the following statement today:

“Many of the current estimates of cap-and trade’s distributional impact are in direct contradiction to microeconomic theory. Using implausible assumptions about free emissions allowances, the government’s analysis concludes that the costs associated with cap-and-trade legislation are progressive. Unfortunately, they are almost certainly regressive, with America’s top income-earners profiting by more than $14 billion per year, and low- and middle-income households footing a large portion of the burden. What’s more, the free allowances distributed under Waxman-Markey will result in large windfall profits for the corporate allies of the legislation.”

Based on these findings, IER economist Bob Murphy made the following remarks:

“Andrew Chamberlain’s analysis of the Waxman-Markey bill’s cap-and-trade title illustrates just how flawed and skewed this legislation is toward rent-seeking special interests. For one, Chamberlain puts to rest the ‘postage stamp a day’ claim that proponents and some in the media point to as the cost of this misguided legislation. And secondly, and more important, it shows that cap-and-trade, as outlined in Waxman-Markey, is nothing more than a transfer of wealth from the poorest to the richest among us.

“These new findings should send a clear message to the American people – cap-and-trade helps the powerful and hurts the rest of us. And as Congress’ corporate allies receive the bulk of the benefits Waxman-Markey has to offer, our environment, along with our struggling economy, will suffer for years to come. Congress needs to get out of the business of picking winners and losers and allow the market to determine which energy and electricity sources should power our economy.”

Note: To speak with ANDREW CHAMBERLAIN or BOB MURPHY, please contact Laura Henderson, (202) 621-2951, lhenderson@ierdc.org, or Patrick Creighton, (202) 621-2947, pcreighton@ierdc.org

More from IER on the Chamberlain Study:

Summary: Who Benefits From Free Emission Allowances?

Fact Sheet: Main Street Under Attack from Cap-and-Trade

Study: Who Benefits From Free Emission Allowances? An Economic Analysis of The Waxman-Markey Cap-and-Trade Program

The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.

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