Darren Samuelsohn

Rockefeller Bill – Is It Good Enough?

by Marlo Lewis on July 23, 2010

in Odds & Ends

Barring the trickery of a lame-duck conference committee, cap-and-trade is dead as a door nail in the 111th Congress. As you’d expect, there is much wailing and gnashing of teeth, with Obama officials, Democratic leaders in Congress, and environmental lobbyists all saying it’s all the other guy’s fault.

Columnist Darren Samuelsohn provides several juicy quotes in Politico today. My favorite is from an unnamed “exasperated Administration official who lambasted environmentalists — led by the Environmental Defense Fund — for failing to effectively lobby GOP senators”:

They spent like $100 million and they weren’t able to get a single Republican convert on the bill.

Sure, it was just a matter of poor lobbying skills! The fact that nobody knows how to power the economy with solar panels, wind turbines, and cellulosic ethanol had nothing to do with it! The fact that energy taxes kill jobs and jobless rates remain shockingly high had nothing to do with it! The blame gamers are in denial.

Having failed to snooker Senate Republicans into providing bipartisan cover for cap-and-tax, Democratic leaders must now take sole responsibility for EPA’s endangerment rule and the ensuing regulatory cascade. Waxman-Markey and most other cap-and-trade bills contained language preempting EPA regulation of greenhouse gases under various Clean Air Act provisions. The sponsors repeatedly tried to sell their bills as the only way to avoid heavier and more unpredictable regulation under the Clean Air Act.

This was always a lame sales pitch. Its success depended on Rs being too dumb to figure out that Democratic leaders were actually promising to commit political suicide rather than wielding a mighty legislative hammer. Colorado State University Prof. Roger Pielke, Jr. and the Breakthrough Institute’s Michael Shellenberger warned more than a year ago that threatening to sic EPA and eco-litigators on the economy unless Rs lined up behind cap-and-trade was a strategy that could easily backfire:

Pielke, Jr.: Republicans must be drooling over the possibility that EPA will take extensive regulatory action on climate change. Why? Because the resulting political fallout associated with any actual or perceived downsides (e.g., higher energy prices) will fall entirely on Democrats and the Obama Administration. Far from being an incentive for Congress to act on its own, the looming possibility that EPA will take regulatory action is a strong incentive for Republicans to stalemate Congressional action and a nightmare scenario for Democrats.

Shellenberger: In other words, the White House “threat” to Republicans and moderate Democrats to regulate carbon is the equivalent of threatening your enemy with suicide. (“Don’t make me raise energy prices! You’ll really be in trouble with your voters when I raise their energy prices!”)

On June 10, the Senate voted 53-47 against S.J.Res.26, Sen. Lisa Murkowski’s resolution of disapproval to overturn the legal force and effect of EPA’s endangerment rule. Had S.J.Res.26 become law, it would have stopped EPA and the trial lawyers from imposing unlegislated climate policy on the nation. President Obama threatened to veto the resolution. All 41 Senate Republicans and six Democrats voted for S.J.Res.26. It failed because 53 Democrats voted against it.

Thanks to the vote on S.J.Res.26, the Democratic leadership has become the Party of Endangerment — the party endangering America’s economic future by taking exclusive ownership of EPA’s endangerment rule and the regulatory chain reaction it has set in motion.

Unsurprisingly, congressional Democrats are now looking for a way to have their cake and eat it — claim to protect their constituents from regulatory excess while actually protecting EPA’s purloined power to make climate policy. “The time has come to prevent EPA from going forward next year with regulations on stationary sources [of greenhouse gases],” Rep. Rick Boucher (D.-Va.) told Energy and Environment News (subscription required). Other Ds are making similar noises.

Their vehicle of choice is a bill sponsored by Sen. Jay Rockefeller (D.-W.Va.), which would postpone EPA regulation of stationary sources of greenhouse gases for two years. Some key points to keep in mind.

  • Most energy-intensive investments have much longer planning horizons than two years. Thus, the Rockefeller bill would leave a cloud of regulatory uncertainty hanging over the economy, deterring many firms from starting new projects this year and next. 
  • To provide real protection, re-enacting the bill would have to become an annual ritual on Capitol Hill. That, however, is not something any of its sponsors indicate they intend or want to happen.
  • The bill would leave the endangerment rule intact, setting the stage for money-is-no-object regulation of greenhouse gases under the National Ambient Air Quality Standards (NAAQS) program.

The Rockefeller bill’s chief purposes are not economic but political. It was designed to siphon off Democrat support from the Murkowski resolution, and it may well have provided the legislative margin of victory for the Party of Endangerment.

The bill’s main purpose now is to obscure what the vote on S.J.Res.26 made so clear — namely, which Members of Congress actually oppose regulatory excess and which do not, and which Members actually want politically accountable policymaking and which do not.

My unsolicited advice to the friends of democratic accountability in Congress is to safeguard and refresh the hard-won political clarity they achieved in the vote on S.J.Res.26. They can do this by seeking votes on amendments to toughen and improve the Rockefeller bill. Here are two obvious ideas:

  1. An amendment to suspend stationary source regulation of greenhouse gases until Congress votes to remove the suspension. A vote on this amendment would clearly distinguish those who want the people’s representatives to determine climate policy from those who want non-elected bureaucrats, trial lawyers, and activist judges to be in charge.
  2. An amendment to suspend stationary source regulation of greenhouse gases until the rate of unemployment falls to 5.5%.  A vote on this amendment would clearly distinguish those whose priority is to grow the economy from those whose priority is to grow EPA’s power.

What if the amendments are defeated? Congress could still pass the Rockefeller bill, which at least would put EPA on hold for two years. More importantly, even if defeated, such amendments would separate the real champions of prosperity and self-government from the pretenders.

Will the Party of No Foil the Half-Baked Greenhouse Machiavellis?

by Marlo Lewis on July 21, 2010 · 1 comment

in Global Warming

Many have already written the obituary for the Kerry-Lieberman bill and other cap-and-trade legislation in the current Congress. In today’s Politico, however, columnist Darren Samuelsohn quotes Sen. John Kerry’s rejection of that assessment: ”No, it’s not dead because we’re going to have a lame duck session and we have weeks ahead of us.”

Re-read the first part of Kerry’s explanation. Kerry is saying that even if the Democratic leadership does not hold a vote on cap-and-trade before the November elections, fearing the wrath of the electorate, the greenhouse gang might still enact cap-and-trade after the elections, when voters could no longer hold them accountable.

How exactly would cap-and-traders pull it off? Samuelsohn summarizes the strategy as explained by an unnamed spokesman for a “major advocacy group”:

But one source from a major advocacy group said Wednesday that another option is for the Senate to pass a pared back energy measure now and then go to conference during a lame-duck session with the House-passed climate bill that includes greenhouse gas limits across multiple sectors of the economy. At that point, the source said, anything is possible.

Clever, but perhaps not clever enough. As Machievelli infamously advised princes long ago, one should not say to someone whom one wants to kill, “Give me your gun, I want to kill you with it,” but merely “Give me your gun,” for once you have the gun in hand, you can satisfy your desire.

Kerry, the unnamed advocacy group spokesman, and others have let the cat out of the bag. They are saying in effect, “Give us an energy bill, any energy bill, we want to snooker you with it to get cap-and-trade. We’ll conference any energy bill passed by the Senate with Waxman-Markey in a lame duck session, and neither you nor the American people will be able to stop us. Hah!”

Except that loose-lipped schemers are half-baked Machiavellians. The Party of No can and should have the last laugh. All Senate Rs have to do is resist the temptation to “do something.” They now have a compelling and easily explained reason to postpone further consideration of energy legislation until the next Congress. It is simply that the greenhouse gang, by its own admission, does not intend to play fair or respect the wishes of the electorate.

Rs who strongly feel the impulse to “do something” need merely wait until January 2011, when they are widely expected to hold more seats in both the House and Senate, and when Waxman-Markey will no longer be in play.

Enviros flail over FOIAed Treasury documents

by Marlo Lewis on September 17, 2009 · 2 comments

in Global Warming

A headline in yesterday’s evening edition of Greenwire (subscription required) declares: ”Treasury; enviros go on offensive against media reports of cap-and-trade costs.” In fact, enviros went on defense.

As has been widely reported (e.g. here, here, here, and here), CEI, using the Freedom of Information Act (FOIA), obtained two Treasury Department documents discussing the cost of a cap-and-trade program. The first of these documents, dated 11/6/08, states (p. 1) that the administration’s plan to auction all allowances under a cap-and-trade program “could generate federal receipts on the order to $100 to 200 billion annually.” It further states (p. 2) that, “Economic costs will likely be on the order of 1% of GDP, making them equal in scale to all existing environmental regulation.”

To put these numbers in perspective, CBS reporter Declan McCullagh said that a cap-and-trade program costing $200 billion annually would be ”equivalent to hiking personal income taxes by about 15%,” or an “extra $1,761 per household.” As you can imagine, cap-and-traders went ballistic.

Greenwire faults McCullagh for neglecting to “state that Obama publicly stepped back from a 100% auction of allowances as the House negotiated and passed a climate bill that gives away more than three-quarters of the allowances for free during the program’s first years. The House legislation auctions only 18% of the allowances until about 2020.”

Greenwire quotes Treasury official Alan Kreuger, Harvard economist Robert Stavins, Josh Dorner of Sierra Club, and Tony Kreindler of Environmental Defense Fund, all asserting that McCullagh’s analysis is incorrect, because both the Obama plan and the House bill would return billions of dollars to taxpayers from auction permit sales.

Three points are in order here. First, Obama has not abandoned 100% auctioning.  OMB’s Mid-Session Review of the federal budget (Table S-11) projects “climate revenues” from “emission allowance auctioning” of $626 billion during 2010-2019. That’s slightly lower than the $645.7 billion in climate revenues projected in the President’s Budget(Table S-2). But the difference results from a technical adjustment, not a change in policy to accommodate the Waxman-Markey bill. The Mid-Session Review is an official statement of administration policy; it assumes 100% auctioning of emission allowances.

Second, the whole issue of auctions vs. free allocations is largely a distraction. Whether emission allowances are auctioned or distributed free of charge, the emissions cap determines the total number of allowances, and the market (supply and demand) determines allowance prices. The 11/6/08 Treasury memo is quite clear on this point: “Emission allowances under a cap and trade system are valuable assets regardless of their allocation method (analogous to revenue under an equivalent tax policy).”

As the cap tightens, the supply of allowances declines, allowance prices increase, and energy prices increase. Consequently, consumer spending, GDP, job creation, and wages all decrease relative to what they would be in a non-carbon-constrained economy. 

These impacts are the intended effect of a cap-and-trade program, and they occur regardless of whether allowances are auctioned or given away. The Heritage Foundation’s analysis of the Waxman-Markey bill, for example, assumes the allowance allocation scheme outlined in Reps. Waxman and Markey’s May 14, 2009 Memorandum, “Proposed Allowance Allocation.” The allocation formula in the final legislation passed by the House in June differs only in the details. The Heritage analysis projects significant economic impacts by 2035:

  • Gasoline prices will rise 58% (or $1.38/gallon) above the baseline forecast, which already contains price increases;
  • Natural gas prices will rise 55%;
  • Heating oil prices will rise 56%;
  • Electricity prices will rise 90%;
  • A family of four can expect to pay $1,241 more for energy costs per year;
  • Including taxes, a family of four will pay$4,609 more per year;
  • A family of four will reduce its consumption of goods and services by up to $3,000 per year, as its income and savings fall;
  • Aggregate GDP losses will be $9.4 trillion;
  • Job losses will be nearly 2.5 million; and,
  • The national debt will rise an additional $12,803 per person.

Third, returning part of the revenues from auction sales to households via tax rebates does not ensure low economic impact. Payments for auctioned permits are not the only cost of Waxman-Markey. A bigger cost is the damage done to the economy via higher energy prices. Even with the distribution of allowance revenues to households and other interests, the Heritage Foundation finds Waxman-Markey’s damage to the economy exceeds $9 trillion in the first 24 years.

 A reductio ad absurdum may help clarify this. Imagine that we tax milk at $30,000/gallon and rebate the tax revenue directly to each citizen. Bill Gates buys one gallon per year and nobody else buys any. The tax is returned to the 300 million residents of the United States and each gets $0.0001.

Proponents thus conclude that there is no economic impact. They overlook a whole slew of devastating costs: Lost profits and jobs in the dairy sector, lost tax revenues from the dairy industry, higher unemployment benefit payments, poorer nutrition and health, etc.

Claims that Waxman-Markey is a bargain once you consider the taxpayer rebates are similarly bogus.