The Good News—the Air is Getting Cleaner

The report can be summed up with this graphic from EPA:

GDP, vehicle miles traveled, population, and energy consumption have all increased since 1990. But despite the fact that more people are using more energy to produce more goods and services, air pollution emissions have decreased.

EPA reports that air quality has improved for the six main air pollutants:

Since 1990, nationwide air quality has improved significantly for the six common air pollutants. These six pollutants are ground-level ozone, particle pollution (PM2.5 and PM10), lead, nitrogen dioxide (NO2), carbon monoxide (CO), and sulfur dioxide (SO2). Nationally, air pollution was lower in 2008 than in 1990 for:

• 8-hour ozone, by 14 percent
• annual PM2.5 (since 2000), by 19 percent
• PM10 , by 31 percent
• Lead, by 78 percent
• NO2 , by 35 percent
• 8-hour CO, by 68 percent
• annual SO2 , by 59 percent

The below graphic, from EPA’s website, (but not in the actual air trends report) shows air quality trends since 1970. These trends are even more dramatic than the 1990 to 2008 numbers.

The Bad News: the Press Does Not Seem Interested in Telling the American People Our Air Quality has Dramatically Increased

This is good news that air quality continues to improve and even more so because the American people do not know it. According to a 2004 poll from the Foundation for Clean Air Progress, only 29 percent of people thought that “America’s air quality is better than . . . it was in 1970.”

One reason that the American people do not know this is because the press does not report on it.  So far not one major newspaper has written a story about the good news in this air trends report—there’s nothing from the Washington Post, New York Times, Los Angeles Times, or any of the other major news outlets. The only story we could find is from E&E News (a subscription-based environment and energy news service) and even then it was the 12^th story in their afternoon publication.

It’s tough for the American people to lean to the truth about air quality when the media does not report the good news.

Our Air is Getting Cleaner

Today we can breathe easier knowing that our air is much cleaner than in the past. Even though the media is not reporting this good news to the American people, our air quality has substantially improved and will continue to improve. The data shows the truth.

In this context, of course, “seizing the energy opportunity” means that the government seizes tax dollars to help private companies invest in inefficient energy projects that could not survive in a free market. As your mother always told you, just because all the cool countries are jumping off an energy-boondoggle cliff, doesn’t mean Americans should too. It’s good to be “left behind” with all the affordable energy provided by fossil fuels.

CAP’s Vision

The Center for American Progress (CAP) study summarizes the apparently dire situation:

By 2020, clean energy will be one of the world’s biggest industries, totaling as much as $2.3 trillion.1 Over the past year, other countries made huge investments to seize the economic opportunity provided by the historic shift from fossil-based energy to renewable, low-waste electricity and fuel. These investments weren’t made out of thin air, but were a result of intentional public policies, which in turn provided a strong stimulus for new public and private investment in new clean-energy markets, infrastructure, and human resources. (p. 1, emphasis added)

We agree on one thing: The investments in inefficient energies didn’t come out of thin air. On the contrary, the type of “clean energy” programs that CAP is pushing would rely on money taken from taxpayers. Even private funding would largely be driven by government mandates that artificially penalize traditional energy sources.

[China, Germany, and Spain] invested in clean energy for short-term benefits and laid a solid foundation for future sustainable economic growth by either setting a price on carbon or implementing strong national energy performance standards or both, thus spurring innovation in new technologies that lower carbon emissions. A 2009 study by the CERNA Research Program on Technology Transfer and Climate Change found clear evidence that developed countries that ratified the Kyoto Protocol—each of which set a legally binding target to reduce its carbon emissions—saw a rise in green-tech innovation patents of more than 33 percent…Developed nations that didn’t initially ratify Kyoto—the United States and Australia—saw no noticeable change in their share of total green tech patents over the same time period. (pp. 1-2, emphasis added)

It is not surprising that when governments pick winners and losers in the energy sector, the winners do better. The CAP study simply takes for granted that the economy should be moving away from fossil fuels and into politically favored technologies, such as wind and solar. But if those are the wrong sectors to expand—at least for now—then the boost in patents in “green-tech” isn’t a blessing, but a curse. By the same token, if the government banned automobiles tomorrow, that would no doubt stimulate a flurry of patents in ten-speed bicycles and Conestoga wagons. This wouldn’t signal US leadership, it would just be silly and wasteful.

The same is true for “green-tech” investments. If the government places artificial penalties on high-carbon energy sources, then the country will be poorer in conventional terms, such as GDP or per capita income. Now, if the scholars at CAP want to argue that this impoverishment is worth it to avoid global warming, then they should go ahead and make that argument.

But the scholars at CAP know that the American people wouldn’t go for such a sales pitch, especially in the midst of a deep recession and unemployment hovering at 10 percent. That’s why CAP’s spin doctors say we can have our green cake and eat it too. They claim that not only will switching to less efficient energy sources (like solar and wind) save the planet, but it will also spur new job creation.

Ironically, Lindsay Graham himself let the marketing cat out of the bag, as quoted in the New York Times:

“The momentum around this large cap-and-trade bill to save the planet has been replaced by a business model: How do we create jobs and stay ahead of the Chinese and clean up the air?” Graham said earlier this week…”Once you start changing your perspective from ‘Iowa is going to be beachfront property’ to ‘How do you create jobs and clean up the air?’ you have a completely different focus,” he added.

US First Among Lemmings?

It is amazing that the green-energy boosters continue to cite Spain as a success story, despite the fact that their unemployment rate in December was more than 19 percent. The famous Calzada et al. study has chronicled the unsustainable bubble in Spanish renewables, a bubble inflated by government subsidies and mandates that popped once the support was only slightly scaled back.

Germany’s 8.2 percent unemployment is a tad better than the United States’. But this doesn’t surprise us, as the German government has been warning against runaway “stimulus” spending. German Chancellor Merkel’s government has been more fiscally responsible than the Obama Administration; of course their economy is on a better footing at the moment.

As for China, we also note that they are adding one coal-fired power plant a week, a nuclear plant a month, and are in the process of constructing the largest hydroelectric dams known to man. Will CAP put out a study warning that the US will get left behind in the scramble for coal, nuclear and hydropower? (CAP congratulates China for 16% of its power being from hydropower and wind, failing to mention that 95% of that combo is hydropower, principally from the new Three Gorges Dam.)

The CAP study favorably cites the Chinese tariffs on foreign-made turbine components, which are in place to boost job growth in the Chinese wind sector. But, of course, this just places an obstacle in the way of American manufacturers trying to export renewable technology to China. Taken to its logical extreme, the CAP mindset would eliminate the benefits of international trade altogether, so that every country’s workforce had to produce everything internally. That would “create jobs,” no doubt, but in the same way that a household would keep really busy if it had to grow its own food and sew its own clothes.

Conclusion

The CAP study urges the U.S. government to copy the worst economic ideas from around the world. When the government picks winners and losers, it doesn’t create wealth or jobs in the long run. On the contrary, government micromanagement will simply divert resources from efficient energy sources into inefficient ones. This will raise energy prices for consumers and retard job growth.

At some point down the road, it might make economic sense for the country to switch away from fossil fuels towards renewable technologies. But it doesn’t make sense right now. The proof is that private investors aren’t willing to put their own money on the line; they want the government to force taxpayers to foot the bill.

As Ben Lieberman of the Heritage Foundation observed, Americans shouldn’t be worried when other countries are “ahead of us” as they run off a cliff

The Obama Administration’s recently released “Economic Report of the President” devoted an entire chapter to “Transforming the Energy Sector and Addressing Climate Change” [.pdf]. Whenever the government promises to transform an entire sector of the economy, we know to watch out. Upon a simple reading it is obvious that the president’s fancy economic rhetoric doesn’t justify the $60 billion in “stimulus” funds and the proposed new mandates on the private sector. Even the report’s own analysis shows that the likely damages from climate change are comparable to the economic damages of more government regulation.

The Official Economic Argument for Intervention

Frequently when governments want to increase their power, money, and influence they justify their schemes with a scientific appeal. Standard economic theory provides just such a justification in the form of “market failure,” where the Invisible Hand breaks down because of “externalities.” Most people are familiar with the alleged negative externality of greenhouse gas emissions—which then justify either carbon taxes or cap-and-trade—but the president’s report introduces us to a new market failure, this time from a positive externality:

A market-based approach to reducing greenhouse gases [i.e. cap-and-trade] will provide incentives for research and development (R&D) into new clean energy technologies as firms search for ever cheaper ways to address the negative externality associated with their emissions. However…there is a separate externality in the area of R&D. Because it is difficult for the person or firm doing research to capture all of the returns, the private market supplies too little R&D—particularly for more basic forms of R&D…In this case, government R&D policies can complement the use of a market-based approach to reducing greenhouse gas emissions and yield large benefits to society. A policy that broadly incentivizes energy R&D is more likely to maximize social returns than a narrow one targeted at a specific technology because it allows the market, rather than the government, to pick winners. Likewise, funding efforts in support of basic R&D are less likely to crowd out private investment because differences between private and social returns to innovation are largest for basic R&D. (Economic Report, p. 243, bold added)

Rhetoric versus Reality

Given the textbook justification for government spending, we would now expect the Obama Administration to tout its expenditures on, say, math and science Ph.D. students, or a superconducting supercollider. As the report itself stresses, the economic rationale for such investments is that the social returns spill out across many sectors, so that individual companies would not be expected to spend the optimal level when we consider the costs and benefits to society as a whole. Since the report says the stimulus package provided “$60 billion in direct spending and $30 billion in tax credits” to “jump-start” the transition to a “clean energy economy,” there is a whole lot of ‘splainin’ that the administration must do.

Yet look at the programs the president’s report touts as fulfilling the requirements of “basic R&D,” without the government “picking winners”:

In its 2011 proposed budget, the Administration has stated a commitment to fund R&D as part of its comprehensive approach to transform the way we use and produce energy while addressing climate change. The Recovery Act investments begun in 2009 are a first step in this clean energy transformation. They fall into eight categories that are briefly described here.

Energy Efficiency. The Recovery Act promotes energy efficiency through investments that reduce energy consumption in many sectors of the economy. For instance, the Act appropriates $5 billion to the Weatherization Assistance Program to pay up to $6,500 per dwelling unit for energy efficiency retrofits in low-income homes…

Renewable Generation. The Recovery Act investments in renewable energy generation also are leading to the installation of wind turbines, solar panels, and other renewable energy sources…

Traditional Transit and High-Speed Rail. Grants from the Recovery Act also will help upgrade the reliability and service of public transit and conventional intercity railroad systems. For example, $8 billion is going to improve existing, or build new, high-speed rail in 100- to 600-mile intercity corridors…

Clean Energy Equipment Manufacturing. The Recovery Act investments are increasing the Nation’s capacity to manufacture wind turbines, solar panels, electric vehicles, batteries, and other clean energy components domestically. As the United States transitions away from fossil fuels, demand for advanced energy products will grow, and these investments in clean energy will help American manufacturers participate in supplying the needed goods. (pp. 243-245)

In the quotation above, we have omitted some of the items—such as research on batteries—that could plausibly be classified as “basic R&D.” But as the list above shows, much of the spending programs are the furthest things from basic R&D, and are quite obviously examples of the government shoveling money to favored constituencies. Engineers already know how to weatherize homes and build traditional transit systems; there is no “market failure” here from spillover benefits from R&D spending.

The Costs of Inaction?

After sketching some of the major components of the $90 billion in total government assistance for “clean energy” in the stimulus package, the president’s report goes on to describe the administration’s plans to push for a government cap on greenhouse gas emissions, as well as new mandates on energy efficiency and renewable electricity generation.

In order to stifle voter skepticism over the costs of these proposed interventions into the energy sector, proponents will usually say, “Sure the costs are high, but the costs of inaction are much higher. We can’t afford to not act when it comes to global warming.”

In this context, the reader might be surprised to examine the report’s charts which show that the actual scientific literature—even the “consensus” as codified by the Intergovernmental Panel on Climate Change’s latest report—shows that the case for alarmism is dubious:

[T]he projected losses for the most likely range of temperature changes are relatively modest. For example, at the Intergovernmental Panel on Climate Change’s most likely temperature increase of 3˚C for a doubling of CO₂ concentration (concentrations in 2100 are likely to be higher), the projected decline is 1.5 percent of GDP. (Box 9-2, page 242, emphasis added)

That is worth repeating: The Administration’s own report, in a chapter devoted to the need to “transform the energy sector,” admits that doing absolutely nothing would “most likely” lead to a “relatively modest” impact. This is consistent with the CBO’s modeling which showed that a “pessimistic” estimate of the damages from inaction are lower than the high-end estimate of the economic cost of the Waxman-Markey cap-and-trade bill by the year 2050.

Of course, it’s always possible that unchecked greenhouse gas emissions will lead to disaster. After letting the cat out of the bag regarding the “most likely” impacts from letting the market and nature run their course, the president’s report tells us:

The projected relationship between temperature changes and consumption losses is nonlinear—that is, the projected losses grow more rapidly as temperature increases. For example, while the projected loss for the first 3˚C is 1.5 percent, the loss at 6˚C is five times higher. And the estimated loss associated with an increase of 9˚C is about 20 percent [of consumption’s share of GDP]…Overall, it is evident that policy based on the most likely outcomes may not adequately protect society because such estimates fail to reflect the harms at higher temperatures. (ibid, bold added)

Those are scary numbers, it’s true. But how likely is it that human activities will cause the world to increase 9˚C, when the total warming since the start of the Industrial Revolution has been about 0.7˚C? As this graph from the IPCC’s latest report shows—across three different emission scenarios and five different modeling teams—the probability of such a rapid warming is virtually zero. Once the government gets permission to transform entire sectors of the economy because of the dangers posed by extremely unlikely outcomes, the sky’s the limit.

Conclusion

The proposals to transform the energy sector are so audacious that they can’t even be justified according to the government’s own rhetoric. A simple reading of the president’s own economic report reveals that the billions in handouts violate their own alleged rationale, and the government’s own numbers show that the likely threat of climate change is less damaging than the Waxman-Markey cap-and-trade plan.

The Rhetoric

On February 3^rd President Obama said:

I don’t want us to just say the easy way out is to just give a bunch of tax credits to clean energy companies. The market works best when it responds to price. And if they start seeing…that dirty energy is a little pricier, clean energy is a little cheaper, they’ll innovate and they’ll think things through in all kinds of ways.

Perhaps to disarm critics who complain about government intervention in the market, Obama also said, “[T]he concept of incentivizing clean energy so that it’s the cheaper, more effective kind of energy is one that is proven to work and is actually a market-based approach."

Senator Lindsey Graham made similar remarks to reporters (on January 27) when he said:

To jump-start nuclear power, wind and solar and the green economy, you’ve got to price carbon….How you do it is subject to discussion and open debate. But the idea of not pricing carbon, in my view, means you’re not serious about energy independence. The odd thing is you’ll never have energy independence until you clean up the air, and you’ll never clean up the air until you price carbon.

Passing the Market “Test”?

Proposals for massive new federal interventions into the energy sector referred to by policymakers as “market-based” simply fail the straight-face test. We have already explained that cap-and-trade is not a “market solution.” Academic economists use the term to distinguish cap-and-trade (or an explicit carbon tax) from command-and-control approaches, such as the EPA’s endangerment campaign, in which the government literally orders particular firms to stop using so much electricity or tells utility companies they can’t use coal anymore. By artificially driving up the price of fossil fuels, proponents say, private businesses are free to determine their own solution to the new reality. Presto, there is your market-based solution.

The problem, of course, is that we have no reason to believe that the U.S. government will actually offset alleged “market failures” due to the alleged negative externalities of greenhouse gas emissions. Even if we disregard the recent “climategate” scandals and take the IPCC’s reports at face value, does anyone really trust the government to ignore the political process and completely revamp the energy sector in accordance with pure science as its guiding light?

In fact, President Obama’s own remarks show that his agenda has nothing to do with augmenting the price system to allow the market to work. He said that even if the science of manmade global warming were in doubt, he would still want to push through subsidies for “clean” energy and penalties for fossil-based energy. So how is this about climate change again?

The fact is President Obama has things backwards. Any trained economist – even those who favor government action on climate change, such as Harvard’s Robert Stavins or even Paul Krugman – admit that heavy government penalties on fossil fuels will hurt GDP growth and other conventional economic measures. So contrary to the president’s views, the question is not whether or not these proposals will hurt our already struggling economy, but rather how much pain it would inflict.

Obama’s arguments to the contrary are simply nonsense. New taxes on efficient energy sources through a cap-and-trade scheme, while at the same time lavishing more taxpayer support on inefficient energy sources is no way to lead the world in economic progress.

Obama and Graham Admit Just How Inefficient “Green” Energy Is

Notice too that both President Obama and Senator Graham admit that to revolutionize the American energy sector to fit their bold vision, it wouldn’t be enough to throw billions more of taxpayer dollars at their preferred technologies. On top of that, they would need to “price carbon,” which is a euphemism for massively taxing oil, coal, and natural gas—the fuels that provide 85 percent of our energy.

In other words, the supporters of “green” energy admit that it is so inefficient, that simply giving it a headstart in the race isn’t enough. On top of that, the federal government needs to break the kneecaps of “green” energy’s competitors. We call this the Tonya Harding approach.

Conclusion

It’s no “market solution” when the federal government picks arbitrary emission quotas, especially when that “carbon pricing” is augmented with massive command-and-control regulations and subsidies. As the quotes from Obama and Graham reveal, the only way to make their pet energy sources pass the market test is to change the test.

Senator McCain called “the agreement to take note of the accord” reached by the United States and a handful of developed nations a “nothing burger.” Senator Kerry, on the other hand, believes the accord is important and called China’s participation “the most critical thing” to ensuring Senate passage of the national energy tax, even though few observers believe China will actually do anything to curtail their growing use of carbon-based energy.  Meanwhile, the question of whether the outcome in Denmark was enough to advance international efforts to control emissions can best be summarized by Henry Derwent, president of the Geneva-based International Emissions Trading Association, who noted that the climate talks were a “step backward” in terms of a signal that will support carbon prices.

While the Copenhagen Accord does not represent a major change from the status quo, there are a few troubling aspects of the U.S. effort in Copenhagen worth noting.   

First, U.S. negotiators opposed efforts from China and India to ban the use of border tariffs on energy-intensive exports.  That means the U.S. actively fought to leave the prospect of Smoot-Hawley-type trade wars on the table for Senate cap-and-trade negotiators. The United States has benefited greatly from free trade; now the U.S. government is opposing free trade. 

Second, unlike China and other developing countries, the U.S. will allow “international consultations and analysis” of our greenhouse gas emissions. It is not clear how intrusive these international consultations will be, but with millions of sources of greenhouse gas emissions, it’s hard to believe that they won’t in some way encroach on U.S. sovereignty.

Third, the U.S.’s commitment to hand over billions of dollars a year in taxpayer money was a premature gesture that will only serve as the new floor for developing nations in the next round of international talks.  Why would nations in the third world operate under this agreement if they can now see that the starting point for COP 16’s bargaining talks is $30 billion?

Fourth, we must consider the sheer size of the U.S. delegation; press accounts reveal that in addition to the President, five cabinet officials, four other high ranking officials, one czar, over thirty Members of Congress and a host of staff attended all or part of the conference. The United States spent millions to send a small army to Copenhagen to forge a non-binding “accord” that very few Americans view as a priority.

Finally, contrary to Senator Kerry’s hopes, China’s willingness to sit at a non-binding negotiating table will not ease the pain a national energy rationing cap-and-trade tax will cause for American families and is certainly not a sufficient gesture to justify its passage.

Ultimately, Copenhagen will have no impact on the outcome of the cap-and-trade legislation moving through Congress.  As we have just seen in the health care debate, Senate passage of this increasingly unpopular measure will depend on how much taxpayer money Majority Leader Reid is willing to give away to his fence-sitting colleagues to reach the 60 votes necessary to move this bill forward.

The Administration’s Plan to Coerce Congress to Pass Cap-and-Trade—Force Congress to Rescue the Economy from the Administration’s Heavy-Handed, Command-and-Control Regulations

During the Presidential campaign Obama’s advisors promised to have the Environmental Protection Agency (EPA) regulate carbon dioxide. Today, the President made good on that promise and EPA published a rule in the Federal Register regulating carbon dioxide and greenhouse gases by declaring that these gases “endanger public health or welfare.” (This is why it is called the “endangerment finding” because EPA is finding that greenhouse gases “endanger public health and welfare.”) This announcement was timed to coincide with the opening of the United Nations Climate Change Conference in Copenhagen.

Last week, a top White House economic official explained the Administration’s cynical strategy to reporters:

“If you don’t pass this legislation, then … the EPA is going to have to regulate in this area,” the official said. ”And it is not going to be able to regulate in a market-based way, so it’s going to have to regulate in a command-and-control way, which will probably generate even more uncertainty.”

In other words, the Administration realizes that these regulations will harm the economy, but is trying to push Congress to pass a law they say will reduce the harm. Amazingly, a week and a half after holding a summit to discuss how to create jobs, the Administration is promoting a policy that it admits will harm job prospects. As one news report stated, a White House “official warned that the kind of ‘uncertainty’ generated by unilateral EPA action would be a huge ‘deterrent to investment,’ in an economy already desperate for jobs.” The Administration was acting, in the words of another newspaper writer, like Tony Soprano saying essentially, “Nice economy you got there, Congress. Now either youze guys pass da capntrade deal or my associate here, Ms. Jackson, breaks its legs.”

EPA Was Not Forced to Regulate Greenhouse Gases

The endangerment finding is a response to the Supreme Court’s decision in Massachusetts v. EPA. That decision required EPA to make a finding, but it did not require EPA to find that greenhouse gases endanger human health and welfare. As the Supreme Court explained, “We need not and do not reach the question whether on remand EPA must make an endangerment finding, or whether policy concerns can inform EPA’s actions in the event that it makes such a finding. We hold only that EPA must ground its reasons for action or inaction in the statute.”[1]

What’s really disingenuous about the Administration’s ploy is that even if the Senate had already passed the Kerry-Boxer cap and tax bill, the Supreme Court decision would still stand, meaning the EPA would still have to determine whether CO2 endangers public health and welfare

Thus the entire premise of the Administration’s claim that Congress must pass a bill because if they don’t “EPA is going to have to regulate in this area” is bogus. Whether or not Congress passed a cap-and-trade bill, the Supreme Court ruling required EPA to either reject or issue an endangerment finding.

Command-and-Control versus “Market-Based” Approach

EPA’s threat is misleading in yet another way. By contrasting a top-down regulatory approach with the ostensibly market-based approach of cap-and-trade, one is led to the assumption that the Waxman-Markey and Kerry-Boxer bills simply augment the market price of carbon to reflect the alleged “social cost of carbon” and then let the magic of the market take control.

This is nonsense. In the first place, IER has already demonstrated the tremendous thicket of command-and-control regulations in Waxman-Markey besides its cap-and-trade program. To contrast EPA’s admittedly top-down, command-and-control-style approach with the climate bills in Congress is a false dichotomy. They are both command-and-control.

Second, even the cap-and-trade programs in Waxman-Markey and Kerry-Boxer are not what environmental economists would have recommended to correct the “externality” of possible future climate damages. Many (perhaps most) economists who actually publish academic articles on the issue think that if the government is going to take “market-based” action, it should set a straightforward carbon tax and use the proceeds to reduce other taxes. Failing that, they would argue that the government should implement a cap-and-trade program with full auctioning of permits, and then use the receipts to reduce other taxes. No academic economist endorses the hodge-podge of allowance handouts, “offsets,” and subsidies to various “green” recipients contained in the two pending bills. The only way to justify them is to say “that’s how politics works.”

Follow the Money

So, if the Obama Administration wasn’t legally required to issue regulations but did so—knowing full well they would be harmful to jobs and the economy—why did they do it? The answer is simple—to force Congress to enact the policies the White House really wants: cap-and-trade—and the money that goes along with it. Regulation by EPA only gives the Administration regulatory authority over 85 percent of our energy use (energy from coal, oil, and natural gas) but there is no real revenue increase for the federal government. Cap-and-trade provides huge revenue increases to the federal government. The Administration’s proposed budget called for raising $646 billion in new fees from cap-and-trade between 2012 and 2019. A senior aide later admitted the number could be 2 to 3 times that much, or $1.3 to $1.9 trillion. That makes it the largest tax increase in world history. And this tax will only go up over time as emissions prices go up.

Legislative proposals such as the Waxman-Markey bill and the Kerry-Boxer bill do not raise as much revenue for the federal government as Obama’s budget proposal, but instead the bills redistribute trillions of dollars to preferred interest groups. Under EPA regulation, the government cannot collect taxes or sell credits for carbon dioxide. Under the cap-and-trade plan, it makes out like a bandit and gets to choose economic winners and losers. Government power and money would increase, paid for with the people’s economic liberties.

Conclusion

The Supreme Court did not require EPA to find that greenhouse gases endanger public health and welfare. The Obama Administration chose to make that finding, even though it understands that EPA regulations would be very harmful to a struggling economy. Now the Administration is trying to leverage the harm they have created to force Congress to pass the largest tax increase in the history. We should reject this cynical strategy. Instead of passing legislation to regulate greenhouse gases, Congress could restore the original intent of the Clean Air Act by removing EPA’s ability to regulate greenhouse gases under the Clean Air Act. Those actions would protect the American people from the Administration’s economically harmful regulations.

[1] 549 U.S. 497, 533–34 (2007).

“What was offered today was nothing more than more of the same. Bipartisanship for the sake of bipartisanship may make for good headlines, but the proposal outlined today is a tripartisan bad idea for the American people – paving the way for a job-killing cap-and-trade system that will increase the price of energy across the board.

“The Senators claim that their approach is a ‘market-based’ one. More government mandates, regulations and huge amounts of taxpayer subsidies to unreliable, expensive energy forms – a key component of their plan – will not put our nation on a path toward energy and economic security and is the furthest thing from ‘market-based’. This is a ‘government-mandated’ approach that creates a ‘market’ out of thin air.

“As for the nominal attempts to expand domestic offshore energy exploration, nothing has changed. Commonsense action from the Obama Administration – not Congress – is what now stands between the American people and the vast job-creating energy resources on taxpayer owned lands. The Senators should spend their time urging the Obama Administration to stop its administrative embargo against America’s domestic energy supplies.

“Unfortunately, American families facing economic hardships are strikingly absent from this debate. And they realize that this proposal – like others being considered by Congress and by the EPA – will increase their energy bills, keep more American energy off-limits and cost even more jobs.”

Note: Click here to read the Senator’s framework.

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

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Washington, DC – Today, the Environmental Protection Agency (EPA) released a formal endangerment finding on carbon dioxide and other greenhouse gasses, claiming that such gases endanger human health and welfare. Thomas J. Pyle, president of the market-based Institute for Energy Research (IER), issued the following statement regarding EPA’s action:

“Cap-and-trade, carbon taxes and regulation — from the EPA or by Congress — will cost more American jobs and increase the price of energy across the board. No matter what the Administration says, this announcement, if fully implemented, would fundamentally change the American way of life.

“Administrator Jackson’s statement this afternoon is part of a meticulously choreographed public relations plan collaborated with the White House in the run up to the United Nations energy rationing summit in Copenhagen.

“It’s unfortunate that this Administration is more focused on pleasing international elites in Denmark, than putting forth and working towards commonsense energy solutions that will encourage domestic energy production which will create American jobs.

“Today’s announcement, however – known as an ‘endangerment finding’ – will force as many as 6 million buildings — including hospitals, schools, factories, and churches — to comply with the Clean Air Act, which carries permitting costs of up to $125,000 each. This enormous federal burden will not only cripple small businesses, non-profits and places of worship, it will cost American jobs at a time we can afford it least.”

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

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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.