Waxman-Markey Opposition Threatens US Leadership

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waxman-markey-cap-and-trade.jpgHR 2454 or the Waxman-Markey bill, named after its two major supporters Henry A. Waxman and Edward J. Markey of the Energy and Commerce Committee, was passed in the US House of Representatives on June 27. Its major mandate is a cap and trade system though it does have other green practices scattered throughout. There has been a lot of talk recently, because of this bill, of the viability of a cap and trade system in the US. To evaluate the government’s ability to implement this new system we have to first understand it.

The basics of a cap and trade are fairly simple. It is a way to limit emissions through a credit system. Every business acquires a certain amount of credits; depending on the type of system these credits are either auctioned off or given away by the government. These credits represent the amount of carbon that businesses can emit. If the business cannot adhere to the limit of emissions their credits allow, they must buy credits from companies who are below their cap. Thus the companies who are responsible and limit their emissions are rewarded and those who are not as environmentally friendly are punished.

With this particular cap and trade system only 28% of the credits would be auctioned off over the next ten years. The other 72% will be given away for free, especially to heavy users of coal and other fossil fuels to help them cope with the change. The auctioning of the 28% will generate an estimated 276 billion dollars, which will be distributed to a range of places. Low and middle income families will receive money to help them deal with the increases prices passed down as a result. Big carbon emitters will also receive money on top of getting a good chunk of the free credits.

Where the trouble begins

The specifics of the cap and trade system embedded in HR 2454 are a little troubling. Understand that many businesses with currently high carbon emissions are going to have a hard time adjusting to meet the new standards, but giving them free credits is not the way to go. Auctioning off all the credits would generate government revenue – money that could be distributed to more of the people hardest hit from the resulting increase in prices of energy and goods. Maybe this increase in rebates would quell some of the opposition to the bill.

Besides implementing a cap and trade policy, the bill mandates a 17 percent cut in greenhouse gas emissions by 2020 and an 87% reduction by 2050. Considering the mandates being implemented in California and 21 other states (for instance, buildings will use net zero energy or have net zero carbon emissions by 2030), these reductions do not seem extreme.

The public response to this bill has not been good. Googling the bill generated several articles: almost all were in opposition. Sadly, people tote it as another method Obama has found to increase taxes. They claim it is an unnecessary step to solve a group of alarmists’ wild and false theory, Global Warming. Without arguing the validity of Global Warming, one friend put it to me this way:

“If the believers are wrong and Global Warming is not true then we have implemented changes that will improve our environment and the Earth, if the naysayers are wrong and Global Warming does exist and we do nothing, our cities are underwater.”

The United States is the economic leader of the free world and the most powerful nation on the globe, but we have never been a leader on sustainability. We haven’t signed on to the Kyoto Protocol, we have very few “Green” standards in place, and per capita we emit the most carbon out of any country in the world (19.6 metric tons/person/year compared to 3.7 tons/person/ year from second place China).

Many people claim we are alone in this ever-growing crusade to save the Earth. Interestingly, they claim Europe has given up on sustainability because it is not feasible and unnecessary. Amazing how facts can become so skewed. Not only has the EU accepted the Kyoto Protocol, they have also implemented strict green building standards, emissions limits for cars and many European Countries already have an existing cap and trade system in place. Interestingly, they implemented all of these environment-saving standards with their economies intact…

The US has always lagged behind Europe and other developed nations when it comes to environmental conservation measures. Though this bill is flawed it is a positive step forward in its intent and its power to reduce emissions. Nation-wide opinions need to change on the role of sustainability in our society and hopefully the success of this bill can be the catalyst.

[photo credit: Flickr]

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  • http://www.energyplanusa.com Rmoen

    The root of the climate change problem? We’re letting the United Nations decide what is best for America. And they’re failing us.

    The premise that CO2 drives global warming is based on United Nations’ climate reports that are tainted by politics and an agenda. The reports don’t pass the smell test — see http://energyplanusa.com/ipcc_reports_dont_pass_smell_test.htm . Plus, there’s been many new climate discoveries since the UN’s 1997 Kyoto Protocol that are largely omitted from the reports because, I think, they undercut Kyoto.

    America needs our own scientific assessment of global warming. I am a Democrat who for the past 20 years believed global warming was caused by CO2. But now after reading the UN reports I suspect the fix was in. The UN climate reports contain much good science, but in the end, the UN is a political organization where politics trumps science. We in the United States need our own objective, transparent climate commission to think through global warming. …before we burden our economy with expensive energy.

    Robert Moen, http://www.energyplanUSA.com

  • CTF

    While I applaud all efforts to address global climate change, the cap-and-trade system outlined in this legislation cannot both mitigate carbon emissions and protect the economy at the same time. Rather than a complex carbon trading system that would produce volatile energy prices, a growing number of U.S. economic and environmental leaders now support a straightforward, carbon tax — a policy that’s simple, transparent, and easy to administer. Moreover, the revenues from this approach can be recycled in tax relief for American families, protecting them and the overall economy.

  • http://WWW.MREMERALD.COM JD LILES

    Right-on Rmone.

    Regardless of whose scientists are right, moving towards renewables makes sense, I think, from an economic standpoint. Over time free fuel has got to lead to cheaper energy.

    Either the capitalist’s argument is not being made or it doesn’t apply. I am new to this market and would appreciate thoughts explaining why transitioning to renewables needs to be legislated? Why can’t we make money with free fuel? Is it the grid, interstate commerce, carbon fuel influence,…?

    Congress couldn’t get toilet size right, how can we count on them to get something this significant right?

  • http://livedealive.com Sparticus-Repulic of Texas

    Again more political drumming of centralized government planning cloaked in benign smooth words.

    Right after the Crap & Tax bill was rammed through, the EPA finally released the study that shows the CO2 Global Warming report to have data that is in question. That is a polite way of saying it stinks!

    Government CANNOT create markets how educated ideologues can continue to press forward with this junk science is incredible. The only winners are big corporations that are in bed with government like GE for example. See how nice NBC is to this administration? Anyone know that NBC is owned by GE? Anyone know the staff member just hired for this is from GE?

    Listening and reading other writings I get the summary that the earth is way to large for humanity to affect global climate change; and no computer model can come close to being within reasonable ball park scientific accuracy. Just like the so called Ozone scare overhead in Alaska; the Air Force had data recorded that it was a natural occurring cycle but why let facts stand in the way of politics. It was a mere coincidence that the patent for R-12 and R-22 was expiring around the same time. I know I followed it closely since I was in charge of over 22,000 tons of cooling in our two power plants and we used R-12, R-22 and R-11.

    It is very frustrating to see politics taking us into an economic abyss where we have historical data that government planning just does not work.

    Good grief people the so called “Junk Car allowance” that was just passed cannot not even write out a simple $4500 check for a simple trade in due to the complexity of the paper work.

    Yet many of you want to entrust this government to control your home A/C with utility telemetry, shut down small businesses and send us back into a 3rd world status almost like England and the rest of the Socialist countries.

    CO2 is now a EPA pollutant? Are you folks nuts…?? This administration is out of control and yet so many are blindly drinking the kool-aid.

    Should we be good stewards of our land, YES indeed and it can be done with open public discourse and allowing the market to innovate. The Cap & Tax scheme was dreamed up by none other then Ken Lay remember him the wonderful Enron guru…..and he passed on his ideas to the CEOs of Duke and the Southern Company. You folks still think this is about the planet may be living in another planet of your own.

    Don’t believe a word I write verify it….start by following the money…..maybe some will wake up……

    • Jake

      A carbon tax is not a bad idea but it may be hard to sell. I agree that it would be much easier to administer, but the opportunity to make money with a cap and trade bill instead of either paying a tax or making nothing makes it an easier sell. I know its petty but so many people are already bashing the cap and trade system as a tax, implementing a straight up tax would enrage too many people with the economy the way it is.

      As for tax relief, the cap and trade system in this bill provides some relief using the revenues it generates from the auctioning of 28% of the credits. If the government auctioned off all the credits than it could produce significantly more money for American families.

      Regarding the idea of why energy efficiency has to be legislated, it comes down to economics. It is tough to convince companies to pay for upgrades to their facilities, even though these upgrades will save them money over time. Mandating the companies improve facilities and make their buildings more energy efficient will spur improvement in technology. It will become cost effective to research and develop these new technologies if there is a reward for emissions reduction. If businesses are left alone, they will continue to spew emissions with no consequence and will not implement renewable energy because the cost to put in these systems is high at the moment. If the technology improves the price will drop and renewables will become the cheaper way to go but until then, they need a little government help.

      Again, I am not arguing the validity of global warming, though Obama may be. Why can’t we implement a system that cuts emissions just to improve the environment. Even if carbon, and other emissions, are not raising the global temperature significantly, they are negatively effecting the earth. With emissions reduction will come a slow and hopefully steady switch to renewable energy use over fossil fuels. This benefits everyone as it decreases the US reliability on foreign oil, lowers gas prices, and eventually overall energy costs. Thirdly being forced to cut emissions means that businesses will have to improve the energy efficiency of their buildings and their production process. Though improving efficiency comes at an upfront cost it results in life-cycle savings. Savings that will pay for the upfront cost and bring in large profits over time. This reduction in energy being used by every business will further decrease energy prices, because as demand drops for energy, providers can and will sell energy cheaply.

    • Lucas

      Well put Sparticus. What people don’t realize is that a strict protection of property rights would solve the “market failure” propoganda pushed by central-planners. The government has caused the problem with the “tragedy of the commons”-refering to the public goods.

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  • Lucas

    “If the believers are wrong and Global Warming is not true then we have implemented changes that will improve our environment and the Earth, if the naysayers are wrong and Global Warming does exist and we do nothing, our cities are underwater.”

    -The writer is so illogical how can you take his article seriously? If the “believers” are wrong-you cant make the claim that you have made the planet a better place. Cities underwater-ok. Claiming that “Cap and Trade is fairly simple” is just as moronic. It is actually one of the most complex forms of taxation. Simple = a specific % tax per tonne of carbon. Right or wrong- the author’s premeises are substantially flawed and he offers no cost benefit analysis to society as far as an economic impact. So given his logic, sure, WM-bill is a win win!

    • Jake

      To refute your point that the changes brought about from energy efficient and emission reducing legislation does not help the planet I will provide a example using green building.

      -Buildings contribute 39 percent of total US CO2 emissions and use 72 percent of total US electricity so a logical step for a company to reduce their carbon emissions would be to make their buildings green. By this I mean improve the energy and water efficiency, improve waste management and Indoor Air quality of their buildings. A great set of guidelines to follow is LEED. Following these guidelines and implementing changes advocated by this green building certification system, buildings that are certified save an average of 40 percent on water use, emit 33 to 39 percent less CO2, cut energy use by 24 to 50 percent and reduce the solid waste the building produces by 70 percent. All of these reductions improve environmental conditions, help promote sustainability and help make the planet a better place regardless of whether global warming exists or not. Green Building is only one of the beneficial fields that will see a boost as a result of a bill like Waxman-Markey.

      As for the price for constructing these buildings compared to non-LEED buildings, they are similar. A study was done in 2006 that showed LEED certified buildings were not more expensive than non-certified buildings of similar type and with similar programs. Green Buildings fell in the center of the range for cost per sq ft and sometimes were actually cheaper. The study is called ‘The Cost of Green Revisited’ by Davis Langdon.