Cap-and-Trade Doesn’t Work, Hurts Economy
Just a year ago, “cap-and-trade” was about to save the planet from being cooked by global warming, if only we in Congress could recognize the threat and embrace the elegant solution.
That was then. Now the brave, new economic system that was supposed to cap carbon dioxide emissions and let emitters buy and sell allowances in a government market that mimics capitalism is proving to be less a solution than a problem. Even the Congress-knows-
best crowd is admitting that they can’t figure out how to make it work, and cap-and-trade’s most avid proponent in the House — Speaker Nancy Pelosi (D-Calif.) — indicates that she may not get around to legislating this year, after all.
Her California colleague, Sen. Barbara Boxer (D), pushed a cap-and-trade bill that has turned out to be a window on the difficulties. By some estimates, it would cut America’s gross domestic product by 2.3 percent inside of seven years and raise average energy costs for households by $1,740 per year within 12 years. In the Midwest and Great Plains, the added cost for a household tops $2,000, and in Texas and Oklahoma, it’s more than $3,000.
We don’t have to see very far ahead to observe what’s wrong, though. We can look to Europe right now and notice a cap-and-trade system that was created to meet emission reduction goals under the Kyoto accords. Not only won’t the goals be met, both emissions and the cost of electricity are increasing. Germany, for example, has achieved a 30 percent hike in the cost of wholesale electricity, along with a bulge in unemployment to 9.5 percent. Higher emissions, higher prices and higher unemployment are not the results I want to emulate in the United States. I’ve accepted the European lesson that prosperity is at risk under cap-and-trade, and maybe Democrats are starting to recognize it, too.
Global warming is a trillion-dollar problem, and we’ve always taken it seriously on the House Energy and Commerce Committee. Under Republican and then Democratic leadership, we have been assembling a remarkably thorough record of facts and views from experts.
The more we learn, the more I believe we need to apply a common-sense test to any lawmaking that might follow: We want to keep the lights on; we don’t want the cost of using energy to bankrupt working people; we want them to drive what they want to drive and go where they need to go; and above all, we want them to keep their jobs.
America has big energy challenges in the next 20 years. Electricity production must grow by at least 40 percent. The demand for motor and aviation fuels is expected to increase 1 percent to 3 percent a year, and the requirement for natural gas to heat our homes, cook our food and fuel our industry is headed up. That’s why I welcomed the agreement between BP and ConocoPhillips to build a new natural gas pipeline from Alaska. We’ve gotten by with the same gas supply levels for a decade, and you can see it in the cost of heating a house even after a 19 percent demand reduction by industrial gas users.
In short, life and prosperity in America require energy, and we’ve got large domestic reserves of it right here in the neighborhood. Maybe that’s the most important aspect of the pipeline agreement — it’s a move to be self-reliant instead of betting more of our future on energy from across the oceans.
Another problem with adopting a cap-and-trade program for the United States is that even if we want one, it is very unlikely that developing nations would do the same. Some argue that America needs to cap emissions unilaterally because doing so will inspire the world’s big polluters like China and India to follow us. China, the planet’s largest emitter of greenhouse gases, isn’t interested. Each year, China adds more coal-fired electricity generation than all the power in Texas, and Texas is the U.S. leader in electricity generation.
China is committed to raising its enormous population from poverty, and it has given every indication that it intends to stick with the current policy of breakneck economic development and job creation. China argues that it has the right to grow and raise its standard of living closer to ours, and if we want to reduce worldwide emissions, we should do it by ourselves.
In summary, cap-and-trade works badly in Europe, is DOA in Asia and makes no economic sense in America.
So what’s the answer? We could begin by not abandoning hope and trying to tell people all the things they can’t do — can’t drive to work, can’t turn on the lights, can’t … well, you name it. Contrary to the frenzied reporting on the subject, the science of global warming is not settled, carbon dioxide is not a pollutant and prosperity is not evil. But if we ultimately decide that some kind of action makes sense, let’s start by helping our people find ways to succeed instead explaining all the things they’ll no longer be permitted to do.
I, for one, haven’t given up on the quaint idea that innovation and ingenuity will respond to consumer demand in a free market. Washington is full of talk about the rise of “green-collar” jobs, but nearly everybody here thinks a green-collar worker is a government employee.
The trick for policymakers, scientists and industry will be to get new, low-carbon technologies out of the laboratory and into homes, cars and businesses by inventing products and services to sell instead of rules to impose.
We all want a clean environment, and I believe we can have one. I also believe we can have economic prosperity and job growth if we use market forces, not government mandates, to join the two together.
Rep. Joe Barton (R-Texas) is ranking member of the Energy and Commerce Committee.