Cap & Trade Incoherence

The Waxman-Markey American Clean Energy and Security Act (H.R. 2454) passed the House today 219 to 212. The winning coalition included 211 Democrats and 8 Republicans. The opposition included 168 Republicans and 44 Democrats. Apparently, elections matter. South Dakota's own Herseth-Sandlin voted no.

Here is a summary of what the legislation would do, from Ronald Bailey at Reason:

The ACES Act would establish an artificial carbon market by setting a limit on the amount of greenhouse gases that can be emitted each year. Beginning in 2012, a national cap—or total maximum CO2 emissions—would be set and then ratcheted downward annually. Under ACES, the U.S. would emit 17 percent less carbon dioxide in 2020 than it did in 2005, eventually falling to 83 percent less than emitted in 2005 by 2050.

I do not know what the odds of passage in the Senate are, where the party balance is narrower and a filibuster is possible. So I will address two questions: can the bill work, in some sense, and what will its effects on the American economy be?

The answer to the first question is easy. Even if the bill's targets are met, there is no scientific basis for believing that it will have a measurable effect on global greenhouse emissions, and even less for believing that any effect it has will have a detectable influence on climate. Even if other developed nations follow our lead, and most of them won't, developing economies like China and India aren't going to hobble their own economies.

Cap and Trade has been tried in Europe, and it had virtually no effect on carbon emissions. The reason is simple. Governments can issue allowances whenever the effects of such legislation become sufficiently burdensome to their economies, and they sometimes issue permits for more "pollution" than is being produced. No pain means no gain. Waxman-Markey is playing this game in advance. From the Wall Street Journal:

To get support for his bill, Mr. Waxman was forced to water down the cap in early years to please rural Democrats, and then severely ratchet it up in later years to please liberal Democrats. The CBO's analysis looks solely at the year 2020, before most of the tough restrictions kick in.

When you put off the hard part for twenty years or more, it does not inspire confidence. Some Democrats voted against the bill precisely because they think it will do little or nothing.

Judging the effect on the economy depends on whether the legislation has any real effect. If it goes the same way as Europe, it will have no great effect except to create another expensive program and give Congress the means to tweak it so as to punish or please various constituencies and economic sectors.

What will be the economic consequences if the bill is to have a real impact on energy production? Again from Ron Bailey:

The central fact of the cap-and-trade proposal is that it will increase the price of energy. If energy prices don't go up, the goal of getting energy producers, manufacturers, and consumers to shift away from carbon generating fuels (coal, oil, and natural gas) toward low-carbon sources of energy (nuclear, solar, wind, conservation) will not be achieved.

The bill can only work by making energy more expensive. That in turn will increase the price of everything that requires energy to produce or provide, which is everything. Of course the theory is that the bill will encourage the development of a new, cleaner economy, with sustainable, green energy production and enlightened small carbon footprint consumers. Al Gore will be encouraged to get rid of Bio-Solar One, his gas guzzling house boat. That is wishful thinking on Bio-Solar stilts.

This amounts to a massive tax on the entire economy, to be levied as the same time that the economy will be trying to pay back the tens of trillions in debt we are currently racking up.

All this looks to me like incoherent policy, a vast project based on subvast and mutually irreconcilable ideas. Conservative thinkers warn it will be a big drag on the economy, but I doubt that. The legislation, if it passes, will be amended into insignificance long before that happens. It will only be a small drag on the economy, with no good achieved. Well done Congresswoman Herseth-Sandlin.

Comments

[Gary Rossbach]

I think the bill is totally insane, and the initial estimates of costs to taxpayers has been incredibly underestimated. Corporations won't pay the taxes - those will ultimately be paid by consumers, compounding the cost of this bill. Higher prices will drive down consumpition. Furthermore, the increas to state energy budgets and thus state income taxes was never accounted for in the estimates. Not to mention the fact that our economy is going to pay a huge price in terms of lower sales due to higher costs, and lost jobs as a result. Who thought of this and why was it passed? Why did any industry support it - what are the payoffs and how much pork is buried in the fine print? It is an outrage!
Gary Rossbach
in Colorado

[Joseph Fechter]

People voted for Obama because they wanted change (I did not though).
Hopefully however,Obama will continue to put his foot in his mouth,this
crazy cap and trade stuff will go away and he will not be re-elected.
Not too mention the health care joke.....all of this crap is tied together.
George Bush doesn't seem so bad now!

[AntonioSosa]

You are right, Gary Rossbach! The passage of the economy-killing bill is an outrage. I had the same questions you have and here’s what I found:

Who thought of such outrageous bill?

“Obama Years Ago Helped Fund Carbon Program He Is Now Pushing Through Congress” … “While on the board of a Chicago-based charity, Barack Obama helped fund a carbon trading exchange that will likely play a critical role in the cap-and-trade carbon reduction program he is now trying to push through Congress as president.” http://www.canadafreepress.com/index.php/article/9629

Why was it passed?

Because Obama and his accomplices want this bill passed to further empower and enrich themselves and to force government control (Marxism) on us. They lied, manipulated, intimidated and bribed the opposition to force them to support this bill. For example, Obama tried to bribe LA Republican for vote on Cap & Trade. http://digg.com/politics/Obama_tries_to_bribe_LA_Republican_for_vote_on_Cap_Trade

Why did any industry support it?

Some because they are also looking to profit from the scam at our expense and others because they were bribed, offered special deals.

General Electric (GE), for example supported first Obama’s presidential campaign and now Obama’s cap-and-trade scam bombarding us with daily propaganda -- through its NBC networks, that includes MSNBC and CNBC. Why? Because GE stands to make BILLIONS from the scam at our expense. Not only is GE the largest wind turbine generator maker, but it may benefit as the sole “secondary market” trader of the cap-and-trade credits.

[AntonioSosa]

Through lies, manipulation, intimidation and bribes, Obama’s jobs killing, economy killing bill passed through the House!

Yes, Joseph Fechter, cap and trade is related to the socialized health care scheme because they are both means to impose Marxism on us. Obama’s Cap and trade is another giant step towards Marxism — and the corruption, poverty, enslavement, destruction and despair that Marxism entails.

Obama is working much faster than Hugo Chavez at destroying the economy and imposing Marxism. No wonder the Russians are gloating:

From Pravda: “…the American descent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people…” http://english.pravda.ru/opinion/columnists/107459-american_capitalism-0

We are NOT hapless sheeple! We must do whatever is necessary to defend ourselves and our children from the Marxist dictatorship that’s being set up in Washington.

[KB]

I find myself in the curious position of taking issue with persons who apparently agree with me on the subject of the post. As to the merits:

Mr. Rossbach: the ACES bill is not at all insane. It may be, as I argued, incoherent. But that is because of a collision between irreconcilable strategies and practical realities. Sane people can hold irreconcilable ideas, and deceive themselves about facts.

AS: The bill may be bad, but there is no evidence that the President is pushing it for any other reason than that he believes in it. Contrary to the suggestion in your link, offering to support a Republican for reelection is not a bribe. It is perfectly acceptable politics. If the Democrats get this bill into law, it is because they did it the old fashioned way: they earned it.

As to style:

It is a bad practice to try to refute a policy by making the worst possible interpretation of the motives of the backers. It weakens your case, rather than strengthening it. It is also unhelpful to talk about Marxism and enslavement. If this bill passes, it will be because enough elected representatives in both houses supported it. That is the very opposite of enslavement. It is democracy.