As the House of Representatives girds to debate the Waxman-Markey energy and global warming bill, no one seems to be asking the most important question: Just what is it for? Any honest look at the bill would show that it cannot be about reducing global temperatures, so President Obama and Congressional Democrats must be putting so much effort into it for other reasons.
Why is the bill not about reducing global temperatures? Because the United States, although it emits a lot of greenhouse gases, won’t be the main driver of emissions as the century goes on. That role will fall to the developing world. China, India, Indonesia, Brazil and a host of other large developing countries are developing, and that means they will need energy. That energy will come from the most affordable source—fossil fuels.
For example, the Tata Nano a new, affordable small car, recently went on sale in India. Retailing at about $2,500, the car has already had 200,000 orders placed, by Indians in need of safe, affordable transport. The Nano gets over 50 mpg, and has already sold more units in India than the Toyota Prius did in the U.S. all of last year, when gas prices reached record levels.
This means that developing countries’ emissions will likely dwarf America’s even if Waxman-Markey becomes law. That in turn means that the bill’s provisions will have negligible effect on global temperatures. According to a new analysis by climatologist Chip Knappenberger, the bill, assuming it achieves everything it sets out to do, will reduce temperatures by a mere 0.09 degrees Fahrenheit.
Put another way, the world will reach temperatures it would have reached in 2100 only two years later, in 2102—all this at an annual cost of about $3,000 per American household. The benefit-to-cost ratio is downright microscopic.
So will the bill actually do? Let’s be charitable and assume that it shows leadership to the developing world. China, India, and other large emerging countries have it crystal-clear that they will only cut emissions if the West pays for it. Some of these countries have asked for 0.5 percent to 2 percent of Western nations’ GDP to be transferred to them to help them build clean energy projects. That would amount to an annual payment of up to $280 billion from the U.S. alone—an additional $2,400 per household on top of Waxman-Markey’s costs. Oh, and China has also said that the emissions reduction targets in Waxman-Markey aren’t good enough. Thus, there is very little chance that this bill will persuade anyone to follow our lead without their being paid to do so.
Therefore, the bill will have no appreciable direct effect on temperatures and will have no utility in persuading other countries that count to reduce their emissions. Why, then, are Congressional Democrats and the President himself putting so much effort into ensuring it passes?
One likely answer may be the revenues it promises to bring. Most estimates place the revenue from the auction of emissions permits at about $600 billion a year. The increased costs to American households result from companies pass those costs on to consumers. That’s a lot of money, even in these days of trillion dollar deficits. Does the administration have any projects lying around for which it needs that level of funding?
Well, yes it does. The President’s budget includes $684 billion over the next 10 years for just “down payment” on health care reform. Total national health care expenditure is expected to rise to over $5 trillion by 2018, so the administration will need huge amounts of cash to pay for any expansion of coverage—and $600 billion a year seems like a good start.
In all, it seems very likely that Waxman-Markey’s “cap and trade” scheme is not about cooling the planet, but about creating a new income stream for government to pay for a completely unrelated and vastly expensive new entitlement.
Meanwhile, whatever the bill’s effect on global warming, it will hit the average American household with one of the best-hidden tax grabs of recent times.
Iain Murray is Director of Projects and Analysis and Senior Fellow in Energy, Science and Technology at the Competitive Enterprise Institute.
