Morning Bell: The Costs and Benefits of Waxman-Markey

Posted By Conn Carroll On May 18, 2009 @ 9:28 am In Energy and Environment | 23 Comments

Today the House Energy and Commerce Committee will begin a multi-day markup [1] on the Waxman-Markey energy tax bill. Committee Chairman Henry Waxman (D-CA) has been busy lobbying his own caucus for the necessary 30 votes to get the bill out of committee for weeks, but the bill’s fate is still in doubt. Considering that global warming legislation is a cornerstone of President Barack Obama’s agenda (he needs the tax revenues to fund his other big spending priorities) [2], why can’t the Obama administration convince their own party that their energy tax is a good deal for the American people?

First let’s look at the economic costs of Waxman-Markey. Waxman-Markey attempts to limit greenhouse gas emissions by making it more expensive for greenhouse gas emitters to operate. Instead of a direct tax on greenhouse emissions, Waxman-Markey issues permits (mostly for free but some at a price paid to the federal government) that allow businesses to emit greenhouse gasses. Businesses that fail to lobby the federal government for enough permits to cover their current emission levels will then have to buy them from either the federal government or other businesses that have better lobbyists in Washington, DC.

The net effect of these permits is higher costs for businesses and consumers that emit greenhouse gasses, the most prevalent being CO2. As then-candidate Barack Obama explained to the San Francisco Chronicle [3], this policy will cause electricity prices to “skyrocket.” Since everything you consume requires energy, the higher energy costs caused by Waxman-Markey will spread throughout the entire economy. The Heritage Foundation’s Center for Data Analysis has crunched the numbers and found that by 2035, last week’s version of Waxman-Markey would: [4] 1) reduce aggregate gross domestic product (GDP) by $7.4 trillion; 2) destroy 844,000 jobs on average; and 3) raise an average family’s annual energy bill by $1,500. And this week’s version of the bill appears to have an even greater catastrophic effect on the economy.

That’s a pretty steep cost. So what do Americans get for being $7.4 trillion poorer in 2035? Other environmental legislation has helped reduce acid rain and slow the growth of asthma, so Waxman-Markey must offer some tangible benefits to the American people right? Wrong. Waxman-Markey is a truly unique piece of environmental legislation in that it does not offer a single tangible benefit to the American people.

Global warming is just that: global. The United States still has the largest economy in the world, but China is now the world’s largest emitter of greenhouse gasses. India also has a rapidly growing economy and neither they, nor China, have any plans to reduce their carbon emissions. So, using the left’s own global warming theory, how much would Waxman-Markey actually cool the earth? Climatologist Chip Knappenberger crunched the numbers [5] and found that even the strictest version of Waxman-Markey would reduce projected global temperatures by just 0.044ºC by 2050. That is less than one-tenth of one degree.

So as this week progresses, and you hear scary story after scary story of all the hurricanes, wildfires, and flooding that will occur because of global warming, remember this: according to the left’s own computer models Waxman-Markey would not prevent any of it.