It appears that years of debate about climate change and energy may now come down to a vote on an actual bill, the American Clean Energy and Security Act of 2009 (ACES). As I write this, the vote is scheduled for Friday. If it occurs, you will be asked to vote to implement carbon rationing in the United States.
Without regard to party or ideology, I believe that the evidence is clear that this law would be contrary to the public interest. Here is why, in a nutshell:
1. It would be a terrible deal for American taxpayers. According to the Environmental Protection Agency, it is projected to impose annual costs of about $1,100 per household (a little less than 1% of total consumption) by 2050. The benefits we will get in return? If the law works precisely as intended, in about one hundred years we should expect surface temperatures to be a about one-tenth of one degree Celsius lower than they otherwise would be. The expected costs are at least ten times the expected benefits, even using the EPA’s cost estimates and assuming achievement of the primary goal of the legislation.
2. The argument that “Okay, it’s a terrible deal standalone, but we need to lead the world by example” is extremely unconvincing. First, while you are probably not a climate-science expert, I bet you’ve negotiated a few things in your life. What do you think about the negotiating strategy of unilaterally giving away our most obvious leverage — namely “we’ll reduce our emissions if you reduce yours” — and instead hoping that those nice men who rule China will be guilted into sacrificing their perceived economic self-interest if we just go first? Second and more fundamentally, as per many detailed analyses, the global deal that we would theoretically be chasing isn’t even attractive, even if we assume every technical climate change prediction by the UN IPCC is correct.
3. Contrary to early expectations that auctioning cap-and-trade permits would generate $80 billion per year of government revenue, this law would not contribute materially to deficit reduction. You’ve seen the internal negotiations up close. Because so many allowances have been given away to special interests to try to get the votes needed to pass ACES, the CBO now estimates that it will bring in a net of a little over $2 billion per year over the next decade. As you know, this is about one one-thousandth of this year’s budget deficit.
4. A further effect of all of these deals (which are entirely predictable in a democracy) is that ACES 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. What do you think the odds are that this will change at some undetermined point in the far future when all of the normal interest-group pressures of a democracy are supposed to magically disappear?
5. In short, Waxman-Markey would impose costs at least ten times as large as its benefits, would not reduce the deficit, and doesn’t even really cap emissions.