Thursday, July 12, 2007 By Steven Milloy
Sens. Jeff Bingaman (D-NM) and Arlen Specter (R-PA) introduced this week their "Low Carbon Economy Act" (LCEA) intended to combat global warming. The bill ought to be called the "The Trillion Dollar Giveaway and Wealth Redistribution Act."
The LCEA’s ostensible goals are to reduce greenhouse gas emissions to 2006 levels by 2020; to 1990 levels by 2030; and by more than 60 percent from today’s levels by 2050. These goals are to be accomplished not by directly mandating reduced greenhouse gas emissions (GHGs). Rather, the LCEA would compel larger GHG emitters – e.g., petroleum refineries, natural gas processing plants, liquid natural gas (LNG) facilities, oil and gas importers, and large coal-burning facilities – to pay for the right to emit GHGs.
The lack of a mandate to reduce GHGs emissions means that they could actually increase under the LCEA, as long as emitters are willing to pay to do so.
The LCEA is 130 pages in length and quite complex. So while it will take considerably more time to do a thorough analysis, the bill does have one notable feature that screams for immediate attention – its giveaway of more than one trillion dollars to special interests in its first 10 years.
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Under the LCEA, the federal government would annually issue rights or “allowances” to emit GHGs. In the first year of the bill, slated as 2012, allowances would be issued for approximately 6.65 billion metric tons of GHGs. The amount of allowances slightly decreases every year – for example, 6.59 billion metric tons in 2013, 6.53 billion metric tons in 2014, etc. – until it finally levels out at 4.82 billion metric tons in 2030 and beyond.
These allowances have monetary value – a lot.
Owners of allowances can either use them to pay for their GHG emissions or they can sell them to other emitters who need allowances. Emitters can also simply pay the federal government directly to emit GHGs at a cost of $12 per metric ton of carbon dioxide starting in 2012. This price is slated to increase annually by the inflation rate plus 5 percent. By 2030 – and unrealistically assuming that no inflation occurs – the pay-to-emit price would be about $27.50 per metric ton of carbon dioxide.
Using the pay-to-emit price, the GHG emissions allowances issued by the federal government in 2012 will have a potential market value of $80 billion. The annual market value of these government-issued allowances will rise to over $100 billion by 2018 and hit $130 billion in 2030. It will only take about 10 years – exclusive of any inflation – for value of the allowances issued by the government to exceed $1 trillion.
And incredible as it sounds, the bulk of these allowances – 76 percent for the first five years, declining to 47 percent by 2030 – will be given away at no charge to special interests including private industry, farmers and states. This global warming giveaway works out to a total of $1.34 trillion of free money – not adjusted for inflation – that would be handed out to global warming special interests from 2012-2030. After 2030, the annual amount of free money handed out is about $65 billion, increasing by 5 percent per year, exclusive of inflation.
But the great global warming giveaway is only part of the story.Allowances that aren’t given away – for example, 24 percent of allowances issued from 2012 to 2017 – will be auctioned by the government to GHG emitters ineligible for the giveaway. There can be no doubt that the purchasers of the auctioned allowances will simply pass along their higher costs to consumers in the form of higher prices for all goods and services that involve the energy use – in other words, just about everything.
LCEA supporters might argue that, between the auctioned allowances and direct payments for the right to emit GHGs, the federal government will recoup some of the value of the allowances given away for free. Another way to look at that recoupment is as a redistribution of wealth from consumers to those select entities eligible for the allowances.
And if you ignore that atmospheric reality, then perhaps you’ll note that the neither the LCEA nor any other law that Congress can pass is likely to force China, India, Brazil, Mexico and other developing nations from more than making up for the GHGs that the U.S. may reduce in the future. China just recently passed the U.S. in terms of GHG emissions and has publicly stated that it doesn’t intend to harm its economy by reducing its GHG emissions in the future.
In the end, the LCEA and its ilk will only have created a permanently, well-funded global warming industry that will never go away, regardless of scientific or climactic developments. Just imagine how politically powerful this industry could become – it already has our government, economy and personal liberties by the throat, even in its infancy.
If Congress is determined to pass legislation like the LCEA, then let’s at least entertain a more balanced scenario. Rather than distributing valuable allowances for free to select special interests, allowances ought to be distributed on a more democratic basis – an equal share, say, to every taxpayer. Taxpayers could then sell their allowances to emitters in the open market and recoup some of the higher costs imposed by the LCEA. Since the environment belongs to everyone, let everyone profit from global warming hysteria.
Steven Milloy publishesJunkScience.comandCSRWatch.com. He is a junk science expert, and advocate of free enterprise and an adjunct scholar at the Competitive Enterprise Institute.
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