Now on the floor of the U.S. Senate, America’s Climate Security Act merits sober scrutiny. Sponsored by Senators Joe Lieberman and John Warner and supported by Senators Barack Obama and John McCain, this bill would create the world’s most stringent and enforceable greenhouse gas regulatory regime, far more ambitious than Kyoto or the European Union’s.
George Will called this bill “an unprecedentedly radical government grab for control of the American economy.” The Wall Street Journal called it “the most extensive government reorganization of the economy since the 1930’s.” No part of the political spectrum denies the high cost of Lieberman/Warner’s cap-and-trade scheme to mandate carbon dioxide (CO2). As the country’s leading energy producer, Texas would be disproportionately impacted.
A low average of six macroeconomic analyses reviewed estimate that Lieberman/Warner’s CO2 cuts would decrease gross domestic product (GDP) by 1.5-2.5% annually. That translates to annual costs of $160 billion to $250 billion by 2015 with job losses of 1.2-2.3 million.
Even the Environmental Protection Agency – never known to exaggerate economic impacts of its regulation – predicts a reduction of GDP up to 3.8% by 2030 and 6.9% by 2050. That amounts to $1-3 trillion loss in productivity.
Gas and electricity prices could increase 50%-150% within 10 years. Significantly lower estimates downplay the stringency of the CO2 caps, exaggerate the roles of renewables, or overlook growth.
Using the National Energy Modeling System, the National Association of Manufacturers analyzed Lieberman/Warner’s impacts on individual states. Texas’ gross state product would fall $12-$16.6 billion per year by 2020. Texas job losses would be high. The many trade-exposed manufacturing industries in Texas may be forced to relocate to countries without expensive carbon mandates.
So why the massive costs? The magnitude of reductions and the absence of CO2 control technology. Lieberman/Warner’s hard limits on CO2 begin in 2012 and end with a 70% reduction by 2050. As in nature’s chemistry, CO2 is a ubiquitous byproduct of our energy based 85% on oil, natural gas, and coal.
Unlike pollutants such as nitrogen oxides – think ozone – emission controls capable of reducing CO2 so much and so fast do not yet exist on any commercial scale. And contrary to “quick switch” to renewables policies, there are no realistic near term alternatives to the fossil fuel dominance of the U.S. energy system.
Crunch the numbers on wind energy. At 4,446 megawatts in 2007, Texas has more installed wind generation capacity than any other state. In the same year, actual generation from wind in Texas amounted to 2% of total generation. The national average was less than 1% of actual wind generation. Electric generation from wind always requires a back-up source to prevent outages. When wind stops blowing, as occurred last March 26 in Texas, back-up generation (usually from natural gas) was needed to keep electricity flowing.
Lieberman/Warner’s objective is drawn from the U.N.’s Intergovernmental Panel on Climate Change recommendation that global CO2 must be reduced 50%-85% below 2000 levels by 2050 “to prevent dangerous interference with the climate system.”
The same body predicts that, by 2020, developing countries like China and India will emit 75% of global CO2. Developed countries like the U.S. and Europe will emit only 20% of world-wide CO2 emissions.
Thus, no “temperature saving” benefit accrues from the stringent U.S. reductions unless the developing world similarly sacrifices and pays. Who believes that China and India will arrest their finally growing economies to avert the uncertain risk of global warming? Lieberman/Warner would make “the policy of the United States” binding international agreements through U.N. auspice to secure requisite global reductions. Although an unlikely first in world history, such globally binding agreements on energy are tantamount to global governance.
Lieberman/Warner’s unrealistic, exorbitant approach is an ineffective way to address risk of adverse climate change. Modest carbon taxes have fewer economic pitfalls. Accelerated development of carbon capture technology and of new energy sources with intensity comparable to fossil fuels is the most practical long-term approach.
Built over 100 years, the U.S. energy system cannot be replaced overnight. The economic growth and quality of life this energy supply has made possible should not be ruptured by legislative fiat.
Kathleen Hartnett White is Director of the Center for Natural Resources at the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin. She is the former Chair of the Texas Commission on Environmental Quality.