Cap-And-Trade Folly
The Bear on May 21 2008 at 8:26 am | Filed under: Energy Policy
Climate Change: Legislation pending in the Senate might warm environmentalists’ hearts, but not because of potential cuts in carbon emissions. Their interest is in the heavy economic costs the plans would inflict.
Each bill uses the cap-and-trade scheme to control carbon dioxide emissions. Each establishes limits, then prescribes how to distribute or sell to the private sector the rights to emit specific amounts of greenhouse gases under the cap.
The bill sponsored by Sens. Jeff Bingaman, D-N.M., and Arlen Specter, R-Pa., is the least egregious. It would force greenhouse gas emissions to be cut to about 3% below last year’s level.
The others, one from Sen. Joe Lieberman, the Independent from Connecticut, and Arizona Republican Sen. John McCain, another from Lieberman and Sen. John Warner, Republican of Virginia, are more draconian. The former would cut emissions to 16% below the 2007 output, the latter 44%.
None would affect climate change. All, however, would carry heavy economic losses. Naturally, the environmentalists, having pushed the environment down their list of concerns, like that.
It’s no surprise that the most expensive of the three is the Warner-Lieberman bill. The Environmental Protection Agency reckons it could cost as much as $3 trillion a year in lost GDP. In an economy of roughly $14 trillion, that’s a significant loss.
But even the Bingaman-Specter legislation, the least costly of the three, would hit the economy for about $1 trillion a year.
Much of the pain would be caused by increases in gasoline and electricity prices. The Science Applications International Corporation calculates that Lieberman-Warner by 2030 would boost gasoline prices from 60% to 144% while electricity prices would be up 77% to 129%.
Hit hardest by higher energy prices: The poor.
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