Energy and Climate

Below are the Introduction and Pro/Con sections from the "Energy and Climate" report by Marcia Clemmitt, July 26, 2009.

Introduction

Congress and the Obama administration are advancing policies directly aimed — for the first time — at cutting emissions from burning carbon fuels. The Environmental Protection Agency plans to regulate greenhouse-gas emissions, which scientists link to global warming. The House recently passed a comprehensive energy bill that would institute a “cap-and-trade” system imposing an increasingly tight cap on carbon emissions by requiring polluters such as electric-power companies to buy emission permits or switch to cleaner energy sources. The legislation is backed by most major energy and environmental groups. Some critics say the bill is fatally flawed, however, partly because the trading market in which big carbon-emitting companies may buy unused pollution permits will make carbon-fuel prices too unpredictable and open to manipulation. It's also unclear whether public support for regulating carbon will continue if the effort significantly raises prices for electric power and manufactured goods.

The Issues:
* Are climate-focused energy proposals too costly?
* Will the Waxman-Markey bill help reduce climate change?
* Will Democrats' alternative-energy policies produce enough energy?

Pro/Con

Will the Waxman-Markey bill harm the economy?

PRO Rep. Fred Upton, R-Mich. Ranking Member, Energy and Commerce Subcommittee on Energy and Environment. Written for CQ Researcher, July 2009 Our economy continues to struggle. We shed 467,000 jobs in June and have hemorrhaged 3.2 million since Jan. 1. In Michigan, unemployment has soared to 15.2 percent. Yet, despite our economic maladies, Democratic leaders are pursuing a reckless climate bill that would bankrupt America's working families with no guarantee of helping the environment. The carbon mandates under cap and tax would mean the United States could not emit more in 2050 than we emitted in 1910, essentially requiring us to scale back emissions to a per capita level equivalent to those of the tiny coastal nation of Belize. Study after study has predicted cap-and-tax will result in skyrocketing energy bills and massive job losses. The Congressional Budget Office conservatively estimated that meeting the mandated reductions would cost $864 billion, while some anticipate closer to $1.5 trillion. CBO predicted gasoline costs would increase by 77 cents per gallon and diesel by 88 cents. It is not just inside-the-Beltway analysts forecasting exorbitant costs to families. In Michigan, Consumers Energy predicts hefty rate increases — in excess of 38 percent over the next 15 years — just to comply with cap and tax. The increases will surely be higher as Consumers did not take into account inflation or rising fuel and construction costs. Some Michigan manufacturers say they will solely operate at night, when electric rates are cheaper. Efforts to improve the legislation with constructive amendments were blocked every step of the way. We sought to add consumer protections to safeguard working families, but were rebuffed. Efforts to include the world's leading emitters in the legislation were also thwarted. Meaningful climate legislation requires global participation, especially by India and China. According to the July 16 edition of The New York Times, Energy Secretary Steven Chu said that if China's emissions of global warming gases keep growing at the pace of the last 30 years, the country will emit more such gases in the next three decades than the United States has in its entire history. Without international participation, jobs and emissions will simply shift overseas to countries that require few, if any, environmental protections, harming the global environment as well as the U.S. economy. We should take an “all of the above” approach to reducing emissions, with an emphasis on renewable sources of energy like wind and solar, as well as nuclear power. We can simultaneously preserve our environment and create jobs.

CON Daniel A. Farber Professor of Law, University of California Berkeley School of Law. Written for CQ Researcher, July 2009 In the short term, climate-change legislation will cause modest increases in energy costs but will help cut the federal deficit a bit. In the long run, it will safeguard us against dangerous changes in climate and help Americans become leaders in the emerging clean-tech industry. One reason for the modest cost is that the legislation will create a cap-and-trade system rather than directly telling companies how much to reduce their emissions. Cap and trade is the brainchild of economists who believe conventional environmental regulation is too expensive. The whole purpose is to cut industries' costs. Companies will get “allowances” for each ton of carbon dioxide they emit. The total number of allowances is the “cap.” Companies can use the allowances themselves or sell them to other companies. That's the “trade” part of cap and trade, and it makes the program more cost-effective. Under the bill that passed the House of Representatives, most allowances would be given away, but some would be auctioned. Auction proceeds would pay for government programs like vouchers for buying fuel-efficient vehicles and energy rebates for low-income consumers. How much would this cost? The most reliable cost estimates come from the nonpartisan Congressional Budget Office rather than ideological advocates like the American Enterprise Institute. A few weeks before the House passed the climate-change bill, the CBO estimated utilities would pay $15-$26 per allowance from 2010–2019. The impact on consumers would be small — a $20 charge per ton of emissions amounts to 1.4 cents per kilowatt-hour of electricity. CBO later admitted that its cost estimate had been on the high side, because it ignored other ways that companies could reduce their compliance costs. When CBO's original report was released, opponents of the legislation squawked that the legislation would “cost” the government over hundreds of billions of dollars. It turns out that what the CBO meant was simply that the government was losing out on potential revenue by giving most of the allowances away instead of auctioning them. According to economists, auctioning permits is better. And what about the deficit? CBO estimates that climate legislation would decrease the national debt by $24 billion over the next decade by allowing the federal government to earn income from auctioning allowances. In short, climate-change legislation is not the huge economic burden claimed by opponents. It's a cost-effective way of combating a serious threat to our long-term well-being.

To view the entire report, login to CQ Researcher Online [subscription required], or purchase the CQ Researcher PDF.