Earlier this year the U.S House of Representatives approved the Waxman-Markey bill to establish a so-called cap-and-trade program designed to reduce U.S. carbon dioxide (CO2) emissions.
Cap-and-trade is a gee-whiz name, but all it means is that the government would establish a total limit for annual CO2 emissions, auction or otherwise distribute ration coupons for the right to emit, and then allow the holders to buy and sell coupons in a legal secondary market.
The Senate is considering a vote on similar legislation this fall. Without regard to party or ideology, I believe that the evidence is clear that such a law, if it is anything like Waxman-Markey, would be contrary to the public interest.
For one thing, it would be a terrible deal for American taxpayers. According to the Environmental Protection Agency’s own projections, Waxman-Markey would impose annual costs of about $1,100 per household (a little less than 1 percent of total consumption) by 2050.
If the law works precisely as intended, in about 100 years we should expect surface temperatures to be about one-tenth of one degree Celsius lower than they otherwise would be. The expected costs are at least 10 times the expected benefits, even using the EPA’s cost estimates and assuming achievement of the primary goal of the legislation.
There are other reasons to be wary of Waxman-Markey as well. Contrary to early expectations that auctioning cap-and-trade permits would generate $80 billion per year of government revenue, it would not contribute materially to deficit reduction.
Because so many allowances have been given to special interests to try to get the votes needed to pass the House bill, the Congressional Budget Office now estimates it will bring in a little more than $2 billion per year over the next decade. This is about one one-thousandth of this year’s deficit.
Waxman-Markey is very unlikely to achieve even the limited benefits that are claimed for it. The details of the bill mean that there is now not a hard cap on emissions for at least the first decade of its existence.
Some argue that though Waxman-Markey isn’t perfect, it is important to set an example for other nations to follow. But the effectiveness of unilaterally cutting emissions amounts to giving away our most obvious leverage with other nations to get them to curb their greenhouse gas emissions seems questionable.
Can we seriously expect China to be guilted into sacrificing its perceived economic self-interest just because we did it first? More fundamentally, the global deal that we would theoretically be chasing isn’t even attractive, even if we assume every technical climate change prediction by the U.N.’s Intergovernmental Panel on Climate Change is correct.
As Capitol Hill prepares to take up climate change legislation once again, Senators should cast a far more critical eye at the chief cap-and-trade proposal than their House counterparts did in June. Waxman-Markey would impose costs at least 10 times as large as its benefits, would not reduce the deficit and wouldn’t even really cap emissions. What, then, is the point?
James Manzi is a senior fellow at the Manhattan Institute.