Climate Bills and a Green Economy

Senate Dems Say Energy Bill Out Early as Monday

July 23, 2010

Reuters - Senate Majority Leader Harry Reid will unveil the pared-down energy bill focusing on reforming offshore oil drilling as early as Monday, a senior Democratic aide said on Friday.

The full Senate could begin consideration of Reid's pending bill on Tuesday and Democrats would like to pass it by the early part of the following week, another Democratic party aide said.

With the Senate set to begin a month-long recess on Aug 6, Democrats abandoned efforts on Thursday to put more complex climate-control measures in the bill at least until September.

The narrowed-down measure would hold BP Plc accountable for the oil spill in the Gulf of Mexico and seek to prevent similar disasters, Reid said on Thursday. It will also contain incentives to convert trucks to run on natural gas and to increase energy efficiency.

Conservative Democratic Senator Ben Nelson, who has opposed much of President Barack Obama's agenda, said such a limited bill may well win Senate approval.

"I think there is a good likelihood that it will pass," Nelson said. "I'm looking for reasons to be supportive, not looking for reasons to be against it."

Gulf Oil Spill 'Crisis' May Revive Growth-Killing Cap-and-Trade Bill

July 19, 2010

Climate Change Fraud - As White House Chief of Staff Rahm Emanuel expressed in the midst of the financial crisis, this administration follows the rule "Never allow a crisis to go to waste." And following President Obama's Oval Office address, it is apparent that many in Washington are doing their best not to let the oil spill crisis in the Gulf "go to waste."

Prior to the Gulf disaster, the American Power Act (the Senate version of cap-and- trade) seemed all but dead. This is as it should be. But with the Senate back from the July 4 recess, either the American Power Act will be explicitly taken up or another clean energy bill will be proffered to which the key provisions of the American Power Act will be attached.

The problem is that there is no real link between cap-and-trade regulations and the crisis in the Gulf. As President Obama himself admitted in a speech at Andrews Air Force Base in March of this year:

"The bottom line is this: Given our energy needs, in order to sustain economic growth, produce jobs, and keep our businesses competitive, we're going to need to harness traditional sources of fuel even as we ramp up production of new sources of renewable, homegrown energy (emphasis added)."

Furthermore, cap- and-trade regulations do not fix the problems that led to the Gulf crisis in the first place, so we will still need to fix these problems. Therefore, even if cap-and-trade legislation were passed, we will still need to drill for oil and natural gas.

All that would change if cap-and-trade legislation were passed is that President Obama and Congress would have chosen the worst possible time to impose job-killing legislation on the economy.

The U.S. economy has been growing thus far in 2010, but not at the robust pace one would expect at this phase of an economic recovery, and the joblessness rate remains unacceptably high.

Additionally, the looming tax boundary and other policy mistakes the administration has already made have set the economy up for a major economic downturn in 2011. Piling cap-and-trade regulations on top of all of this will only make a terrible economic situation even worse.

There have been many economic studies that have assessed the economic damage created by cap-and-trade regulations, including an analysis performed by two of the authors. Depending on how the regulations are implemented, most studies find cap-and-trade regulations will cause a significant reduction in our rate of economic growth.

Relying on the results from a 2007 Energy Information Administration (EIA) study, the present value in the reduction in our economic growth from implementing cap-and- trade regulations would be between -1.6% and -3.2% depending upon how the bill is implemented.

The adverse economic impacts will not be felt equally across industries. Some industries — such as manufacturing, farming and transportation — will suffer more than others. The economic harm created by cap-and-trade regulations will be felt across the country, however, and will be manifested in many different ways.

First, the wealth of individuals across the country will fall. The value of the stock market closely tracks changes in the economy. Therefore cap-and-trade regulations will have a significant and negative impact on the stock market. Reductions in economic growth of the magnitudes estimated by the EIA imply that growth in the S&P 500 will be -3.1% to -6.1% less than otherwise.

For perspective, based on the current values of the S&P 500, 3.1% to 6.1% represents between $340 billion and $670 billion in market wealth, or between $1,100 and $2,200 in lost wealth per person in the U.S. as a result of cap-and-trade regulations.

State pension funds will suffer too. States currently do not have enough assets to meet their current pension obligations, health obligations and other retirement obligations. Consequently, state funds will be significantly strained in the coming years. Current estimates place this deficit at around $1 trillion — though it is likely even higher.

By reducing the financial wealth of the nation, cap-and-trade regulations will only make the unfunded state liabilities worse, not better. Based on data from a 2010 Wilshire report on the condition of state pension funds, we estimate that these investments would be worth $17.1 billion to $34.1 billion less if the American Power Act were implemented than otherwise.

As a result, the funding level of the pension, health and other state obligations will fall from their current 79.0% to between 77.4% and 78.2%. That gap will need to be closed sooner or later by raising taxes or reducing pension benefits. Either solution will be wrenching to many Americans.

Energy taxes, such as gasoline taxes, are generally viewed to be regressive because the dollar value of the tax imposes a larger proportionate burden on poorer individuals than on wealthier individuals.

The same holds true for cap-and-trade regulations. When energy prices increase, the increases will impose a higher "tax" on lower income people. As a consequence, it is likely that the costs of the cap-and-trade regulations will be felt most acutely by those least able to afford these costs.

The costs of reducing carbon emissions are not trivial. If implemented, cap-and- trade regulations would add significant costs to production and have a devastatingly negative impact on the long-term growth of many segments of the U.S. economy.

The negative impacts would be felt across the country and impact people through higher costs, reduced job prospects, lower incomes, lower wealth and a reduced standard of living. Linking cap-and-trade regulations to the current environmental crisis in the Gulf does not change this fundamental reality.