The Cost of Climate Change
There’s been a lot of talk about the legislation that was hastily passed by the House this past Friday night. The “American Clean Energy and Security Act” as it is called, is around 1200 pages long, and apparently already has another 300 pages of amendments which were added shortly before it was passed in a narrow 219-212 House vote. In short, this bill is long: there is a lot of stuff going on here. I’ve taken the liberty of downloading a version of the bill (before the 300 pages of amendments were added) to review myself and I’d like to address a few choice sections of it here, including my opinion on why these new laws are no good for the American taxpayer. I urge all readers to also review the text of the bill and educate themselves on the major shift in federal legislation that is currently taking place.
The first portion of the bill I’ll address is “Section 201 - Greater Energy Efficiency in Building Codes” which calls for a national building code energy efficiency target of 30% reduction in energy use as dictated in local building codes at the time of adoption of the bill in 2009, and 50% reduction in building energy use by 2015. The bill requires state by state adoption of these targets to be written into new building codes within a year after the adoption of the federal law. Each of those building codes must also be approved by the national overseer, the Secretary of Energy, as meeting the targets set forth by the bill. The fact that the government needs to use the states as a vehicle for this shift in building code (a responsibility solely entrusted to the states) is evidence of the federal inability to dictate and enforce such legislation. This change, if adopted by the states, would cause major hardships for the construction industry, not only for builders but for architects, engineers and local jurisdictions, burdening all involved with the extra cost of acheiving this reduced energy consumption target that will ultimately reflect itself in higher housing costs.
The bill realizes that, by its own actions, the cost of energy to the consumer will be increased. This is exemplified by the text in “Subtitle B, Section 432 - Energy Refund Program for Low Income Consumers” which gives refunds to those who can’t afford to pay for their energy consumption. This section is a built-in method for the government to chip in on the increased cost of energy that will result from this bill. Again, the administration of this program also falls on the states who will need to create new beauracratic infrastructure for the pay out of refunds to consumers that can’t afford the energy they buy. The bill also does not specify a budget for the expense of this new program as is customary with legislation funded by taxpayer money.
The final section, which has gotten much more media attention than those previously discussed is the latter portion of the bill, “Title VII - Global Warming Pollution Reduction Program”. This is the basis of what is also referred to as the “cap and trade” program. This section of the bill sets limits on the carbon emissions that companies and industry can, well, emit. The bill allows those that fail to reduce their own emissions to buy credits or offsets from other entities that have been successful in that endeavor, or by investing in sources of renewable energy and thus playing the carbon offset market. The bill sets regulations for the offset market, and targets for reduction of greenhouse gas emissions. The issue here, again, is the increased operating cost transferred to the businesses affected by this legislation. Companies will be forced to limit their production, find new manufacturing methods or be forced to buy offset credits. This will inevitably cut jobs, increase research and development costs, and increase operating costs in an attempt to compensate for money dedicated to adhering to these new regulations. This increased cost to American businesses will be transferred to the consumer…why else would such a provision as the Energy Refund Program be made in the bill?
The provisions of this latest legislation passed by the House, in my opinion, will have detrimental effects on the American economy, the power of states to write their own building standards, the value of energy for the consumer and supplier, and the perception of what climate change means for the American taxpayer. American people across all classes will be affected by increased taxes to support the local, state and federal beauracracy needed to enforce this legislation, and by increased energy costs that the American business will need to pass on to the consumer in order to adhere to new emission and energy efficiency standards. Please read this bill and learn about its contents. The American standard of living and free market are under severe threat.
June 30th, 2009 at 15:46
There is absolutely no common sense associated with this bill in any way. I have no comment, I can not keep commenting on stupidity that seems to be thrown around in Washington these days. All I can say is *when* this gets passed into law (no hope here) this will guarentee 1 term for OBama, and prob will rid all incumbents in congress that voted for this bill. So…silver lining to this cloud that is worse than anything created by CO2.
June 30th, 2009 at 19:35
I have to agree that this bill is a bad idea. I don’t see it getting through the Senate with all the heat it’s receiving.
If the government really wants to force the hand of green technology with financial pressure, just create a pollution tax that is enforced on any company that pollutes past the allowed amount. This can be done with 10 pages of tax code and after a few years can be easily repealed if/when we determine the unintended consequences.
This new system is a bad idea.
July 1st, 2009 at 14:55
I agree with JJ that a carbon tax could have a very similar effect without the complication. I also agree with Drew that a bill like this can have effects on the economy that may be in excess of what is acceptable.
The only point I would make is that it is important to remember that with issues like pollution there is no reason to expect firms to limit their own emissions beyond the point where the benefit of reduction equals the cost of reduction. This may be well short of the point where the benefit to society of the reduced pollution equals the cost of reduction. There is an obvious cost to firms and society in terms of lost production of forced emission reduction, especially in the short term. However, there are benefits of reduction, not captured by the firm or its production, that include improved societal health and mitigation of long-term environmental consequences.
The question is not whether or not the bill reduces short-term production…it will. It is whether it reduces it so much that it offsets the societal gains to less pollutions.
July 1st, 2009 at 16:15
That is if you believe CO2 emissions affect the environment and has a hand in global warming. A study from the EPA showed that since 2001 temperatures have flat lined even though emissions have gone up. There is just not enough evidence that supports and justifies this kind of exceptionally high tax on the American consumer-esp in an already “economic crisis”. I purely see this has a grasp of power and control by the government, nothing more. Like Sherlock Holmes said, if you rule out all the possibilites and what is left, however improbable, has to be your conclusion. Common sense is pushing me to this conclusion. So either Washignton is really really stupid, or really evil and totaly ignoring their bounds of limitation as dictated by the Constituion (well lets face, they haven’t followed that document for years, esp now). Just some of the politicians that have a conflict of interest with this bill:
• Nancy Pelosi, Speaker herself, has $50,000 to $100,000 in Clean Energy Fuels Corp.
• Rep. Edward Markey — has investments between $51,000 and $115,000 in the Firsthand Technology Value Fund (which as three solar-energy manufacturers)
• Al Gore — Mr. “Inconvenient Truth” himself — his venture capital firm is heavily invested in a new software company that’s making software to help companies track their carbon footprint. He, and companies like his, will make a fortune.
(to name a few, i am SURE there is more, and BOTH sides on the aisle)
bottom line, a tax like this has many more negative efftects than positive ones (well at least for us regualr citizens)- long term and short term, and its plainly obvious. When this doesn’t work, which it hasn’t with Spain AND Australia already who have set this up (what was it >1% affect on emissions and unemployment up to 18%!), it will rest solely on this congress and this administrations shoulders.
July 1st, 2009 at 19:55
I think my comment is more general than the politics of this particular instance, which may be dubious. If you don’t believe in the hypothesis of global warming, then it seems reasonable to me not to support this kind of legislation since you would think the benefit of reducing pollution is small.
My comment is designed to point out that in some cases, like the case of pollution, the incentives of firms operating in markets don’t line up with the best interests of the society. This is not because the firm is ill-intentioned, but rather because an alternative that may minimize the costs of the firm is also very damaging to those who have no association with the firm or its products. In these cases, the general premise of a strictly hands off government seems wrong to me.
July 1st, 2009 at 20:56
I see your point, and that would be true if that were the case-if we are dealing with 100% fact that company pollution causes health affecting damage for those with no association to the firm-there should be 3rd party involvement to regulate (even though I disagree that it should come from the legislative/executive branch, and on the federal level-should technically be the state).
But for this instance, the truth is there is not enough evidence to prove this is true and happening to necessitate this particular bill. This bill is coming from faulty support, no matter how inflated the campaign is for being “green”. This will create not just an economic shake up affecting everyone in America, but is totally and ridiculously unconstitutional.
This passed in the house with 8 votes. If it were overwhemingly obvious that something of this magnitude was needed to be done because of drastic and imminent danger to our well-being as a nation, that majority vote would have been much, much higher. this is a huge bill with a huge cost (largest tax in American history to be exact), and quite frankly theories that are made to protect social welfare won’t (and shouldn’t) cut it when you are talking this much money and the expense this will cause to everyone-esp when its just a theory. it should be straight up facts with no question and 100% support.
I am not anti-environment- I love the planet, and I think we need to take care of it, but this bill I think has very little to do with the environmental benefits and more to do with forced legislation that has personal interests and investments from GM/GE/politicians and other companies with their hands deep in Washington where politicians and big businessmen can make money off of this. This is fact- they are and they will…boat loads of money. Kermit said it best - it aint easy being green- it is less efficient and way more expensive kind of energy-and without the cooperation of China and India- our efforts will have little impact at all on the planet. This will cut out small businesses trying to operate, this creates a dependance on federal buracracy, and is ultimatley devistating to American freedom, standard of living, and way of life.
Even now i read that all states will have to adhere to California’s building codes and emissions standards. And we look at CA and they are literally sending out physical IOU’s to people, their finances are pathetic…and we want to follow in their footsteps?? They have the higest taxes in the nation and still have no money. This makes no sense…there is too much conflicting evidence against man affecting global warming and I personally think this is a rushed bill with no thought and a travisty to America.
If this passes I recomend investing in a dependable wood stove…all the while we pay for medicare/Medicade/Universal Health Care/ poor people’s mortgages and company bailouts (did I miss anything? probably) All the baby boomers are retiring, they either wont retire, or our generation will have to foot the bill for all their energy and health needs which I can safely guess those industries make up at least 50% of the economy..so govt will own half of our economy in a matter of 6-8 months this year…this is frightening. especially when i here nanci Peolsi talk. good god WHY
f this s
sorry- rant there, got a little emotional, im back on track …what a beautiful day!….ok Im done.
July 1st, 2009 at 21:00
*hear
sorry for the long post!
July 1st, 2009 at 21:45
Again, I’m not even really talking about this bill or instance in particular. Pollution is just an example of a time when government intervention may be better than a purely free-market outcome. Given the theme of the blog I think it is a relevant example.
I definitely don’t know if that is the case with this specific legislation. It may be too far reaching, too complicated, or otherwise unnecessary. I’m not trying to talk politics here.
July 2nd, 2009 at 04:22
I have a difficult time thinking that a huge bureaucracy can do anything efficiently. Too many chiefs, too little accountability, too easy to “pass the buck” to another faceless department, too much oversight that can be abused. And with a bill of this size, with late amendments that could not have been read or discussed, there is just too much unknown about the consequences of all that legal-ese.
I’m so concerned about this administration. In my mind’s eye I imagine energy prices going up because of legislation like this - legislation that is incomprehensible and full of “stuff” - then as prices go up, the powers that be that caused the increase with new mandates and restrictions will demonize the power companies and nationalize.
It’s much the same scenario as health care is currently suffering. Insurance companies that have been forced to provide for an increasing number of “conditions” - toupees, breast augmentation, pre-existing conditions, counseling, etc. by constant mandates- are now called out because of the cost of insurance. Hospitals that are required to accept all comers and that deal with reduced and underpriced reimbursements for costly procedures from the medicare and medicaid programs are criticized because of their increasing costs. Regardless of what the president says, any goverment takeover will continue to grow, because private health care and insurance providers will be competing with the rulemakers. Can’t compete with that.
Of course there are private devils, too. Usually they are easier to take down than the controllers in Washington.
Definitely concerned about where we are going.
And another thing - enough already of MIchael Jackson, r.i.p.
July 7th, 2009 at 18:50
“Pollution is just an example of a time when government intervention may be better than a purely free-market outcome.”
Government intervention is generally bad. A perfectly viable free market outcome is to create, engineer, innovate, and produce a solution to help reduce pollutants and make things run more efficiently. If the government wants to help then help by creating money in the system, not through printing, by reducing costs to people and businesses. If a company can figure out how to create “green” technology without it costing a fortune to implement and eventually reduce the cost of the product, then companies will dive right in.
However, companies and people cannot be innovative if they do not have capital. They cannot generate capital if they have to pay lots of money for current energy use, health care, and higher taxes.
This bill is a perfect example into how people have changed in the new world of technology. Everyone wants things now. I want to check my email now, the girls I coached wanted to become good players now, we need to fix global warming now. Sadly, things do not happen now. Events like reducing pollution, becoming a master at painting, lacrosse, guitar, or Goldeneye on N64 takes time. A lot of it. Time and patience. Pushing a bill through the system to increase financial pressure on a group in hopes of resolving a situation as fast as possible is irresponsible.
Besides, financial and economic pressure is what the US and UN do to foreign nations who are doing things that they disagree with. Saddam will not let UN inspectors into his nation, stop importing and exporting. North Korea building missiles, place an embargo on military and technological materials, as well as luxury goods. Japan moves on French Indochina and the Dutch East Indies, place an embargo on oil.
We the people have not ourselves as individuals and as corporations been falling in line and doing as we are told, create more and raise taxes.
Economic sanctions for the win!