What are you willing to pay to make a statement on global warming? Does $1,600 a year sound about right? That’s what the Congressional Budget Office says it would cost a typical household to cut emissions of carbon dioxide (CO2) by 15 percent. The goal of H.R. 2454, the "American Clean Energy and Security Act of 2009," is more ambitious. It would require that CO2 emissions be cut to 17 percent below 2005 levels by 2020. Sponsors Henry Waxman (D-CA) and Ed Markey (D-MA) succeeded in moving H.R. 2454 through the House Energy and Commerce Committee on a 33-25 vote late last month. They’re pushing for a floor vote by the Fourth of July.

The vehicle for achieving these emissions reductions would be a new cap-and-trade system. Under it, the federal government would issue permits for every ton of CO2 released into the atmosphere. To ease the initial cost of the program to electricity consumers, Waxman and Markey agreed to give away 85 percent of the permits over the next 20 years, with most going to electric utilities, natural gas distribution companies, trade-vulnerable industries, renewables, and various clean energy research initiatives. But percentages of free credits to those industries as well as the total universe of CO2 credits would shrink every year, making the remaining credits more valuable. Companies that have to buy them at auction would soon find it cheaper to invest in energy-saving technologies than buy the permits they need to continue their old ways. All of these higher costs would be pushed along to consumers – you, me, and our families.

By 2020, the total volume of CO2 permits issued would be 17 percent less than total emissions of that gas were in 2005. Higher prices for almost everything we buy would stretch family budgets by more than $1,600 a year. The effects on the overall economy are a wild card: some industries will clearly gain, but those tied to burning fossil fuels have a lot to lose. Huge dislocations are a certainty.

That covers a good part of the cost side of the ledger. What about the benefits? The U.S. now emits less than a quarter of global CO2 production, and that portion is steadily shrinking as developing countries grow faster than we do. So a 17 percent reduction on our part would cut worldwide emissions by just four percent; even less as other countries grow: not enough to affect climate trends in any appreciable way.

Real progress depends on the rest of the world matching our efforts, and on that front there’s cause for concern. Talks with China – the world’s largest source of CO2 – broke down last week over wildly different views of what can be accomplished. China wants the U.S. to reduce its CO2 emissions to just 60 percent of 1990 levels by 2020 and contribute one percent of our total GDP to clearing the air in China and other developing countries. China also confirmed it will not commit to any specific reductions of its own.

This cap-and-trade bill, at more than 1,000 pages, contains many provisions that are objectionable in their own right, most notably a renewable energy mandate that appears to be both costly and impossible to achieve. But to just touch on a few:
 

• Inadequate assurance of replacement energy. The bill does nothing to ensure that renewable or alternative energy sources would be brought online quickly enough to replace the fossil-based energy that the bill’s declining CO2 caps would force out of the system. The same “Not In My Back Yard” entities that oppose coal plants also oppose industrial wind and solar farms, nuclear energy, natural gas refineries, and transmission lines. Yet the bill blindly removes fossil fuels from the economy while merely hoping that these alternative energy sources are brought online in time.
• Skyrocketing oil costs. The bill forces oil refiners to carry 45 percent of the program’s total burden while giving them only two percent of the credits for free. The 45 percent covers their own emissions plus those generated when the fuels they refine are eventually burned for transportation. The Congressional Budget Office estimates that price increases could be as much as 77 cents per gallon for gasoline, 83 cents per gallon for jet fuel, and 88 cents for diesel fuel, all borne by the consumer.
• Lawsuit abuse. Rather than taking steps to limit the number of climate-based lawsuits, the bill includes a “state attorney general” provision that could lead to widespread enforcement actions against companies that make home appliances, lighting products, plumbing fixtures, and heating and air conditioning products, as well as broad language on perceived climate injuries that could easily be used to generate mass tort litigation. If the goal is to make climate change the next asbestos, then this bill could do the trick.
• Trade sanctions. In a backhanded acknowledgment of the threat this cap-and-trade bill poses for manufacturers, the legislation leaves open the possibility of CO2-based border tariffs beginning in 2025. This naked protectionism would spur justifiable retaliation from our trade partners and could spark a trade war.
• EPA regulation of small businesses. The bill allows the EPA to regulate anyone who isn’t a “large emitter” through the Clean Air Act’s equipment performance standards. So small (and for that matter, all) businesses would be hit directly by EPA regulation and indirectly through higher energy costs passed along by producers.
• Overlapping regulations. The bill temporarily delays, but doesn’t preempt, state cap-and-trade programs. Businesses could be forced to comply with multiple and often conflicting climate laws.
• The end of coal as a source of electricity. The bill’s increasingly stringent targets (a 42 percent reduction by 2030 and an astounding 83 percent by 2050) are impossible for coal to meet without a major technological breakthrough. The one technology the coal industry is banking on – carbon capture and sequestration – is not expected to be commercially available for another decade. That could force a switch to natural gas, driving up costs of that vital energy source for everyone, although the pain would be most intensely felt in areas that depend on coal.

Remember, all of this for a four percent (and falling) reduction in global emissions of CO2 – in other words, to make a statement.
 
The U.S. Chamber is committed to reducing emissions of greenhouse gases. We evaluate every bill or regulation on the subject against five core principles, feeling that they must:

1. Preserve American jobs and the competitiveness of U.S. industry;
2. Provide an international solution that includes developing nations;
3. Promote accelerated development and deployment of greenhouse gas reduction technology;
4. Reduce barriers to the development of climate-friendly energy sources; and
5. Promote energy conservation and efficiency.

This cap-and-trade bill fails to meet these principles. It would impose draconian costs for meager results, in large part because we’d be going it alone. So the Chamber can’t support H.R. 2454 in its current form. Write to your members of Congress and urge them to oppose H.R. 2454, the Waxman-Markey climate change bill. Then let’s work toward a global solution to reducing greenhouse gases that actually produces real results. After all, we’re all in this together.