Congressional Democrats Unveil Energy Rationing, Uh, I Mean, Climate Change Bill
According to the Associated Press:
Democratic lawmakers on Tuesday unveiled a plan to tackle climate change by cutting greenhouse gases by one-fifth over the next decade, a faster clip than urged by President Barack Obama.
The proposal, seen as the first step toward Congress enacting climate legislation this year, was crafted to attract broader support among centrist Democrats. The plan includes measures to spur energy efficiency and to support technology to capture carbon dioxide, the leading greenhouse gas, from coal burning power plants.
The 600-page "discussion draft" will be the basis for climate debates in the coming weeks as the House Energy and Commerce Committee works to craft a bill by mid-May.
House Speaker Nancy Pelosi, D-Calif., called the draft "a strong starting point" and has told colleagues that she would like to get a climate bill passed before Congress departs for its summer recess in August.
The bill ducks one of the central questions--just how will the emissions permits get divvied up? Creating a cap-and-trade carbon rationing scheme will necessarily become a carnival of rent-seeking. Industry wants the permits given away for free as they were in the European Trading Scheme. Why? As a 2007 Congressional Budget Office report noted:
A common misconception is that freely distributing emission allowances to producers would prevent consumer prices from rising as a result of the cap. Although producers would not bear out-of-pocket costs for allowances they were given, using those allowances would create an "opportunity cost" for them because it would mean forgoing the income that they could earn by selling the allowances. Producers would pass that opportunity cost on to their customers in the same way that they would pass along actual expenses. That result was borne out in the cap-and-trade programs for sulfur dioxide in the United States and for CO2 in Europe, where consumer prices rose even though producers were given allowances for free.
Thus, giving away allowances could yield windfall profits for the producers that received them by effectively transferring income from consumers to firms' owners and shareholders. The study of the hypothetical 23 percent cut in CO2 emissions concluded, for example, that if all of the allowances were distributed for free to producers in the oil, natural gas, and coal sectors, stock values would double for oil and gas producers and increase more than sevenfold for coal producers, compared with projected values in the absence of a cap.
Doubling and septupling stock values is of interest to industry. And so in fact, the rent-seeking is already well begun. The Center for Public Integrity released a report last month that found:
A Center for Public Integrity analysis of Senate lobbying disclosure forms shows that more than 770 companies and interest groups hired an estimated 2,340 lobbyists to influence federal policy on climate change in the past year, as the issue gathered momentum and came to a vote on Capitol Hill. That's an increase of more than 300 percent in the number of lobbyists on climate change in just five years, and means that Washington can now boast more than four climate lobbyists for every member of Congress.
Carbon rationing may be necessary to reduce the effects of man-made global warming, but it will definitely result in higher energy prices to consumers. Oddly, the AP reports:
The Democrats also sought to blunt some of the costs of the program to consumers by requiring tougher energy efficiency standards from appliances, buildings and cars and by requiring utilities to make at least 25 percent of their electricity from solar, wind and other renewable energy sources.
Blunt some of the costs? By making appliances, buildings and cars more expensive? By requiring utilities to supply electricity from higher cost renewable energy sources? Go figure.
Whole AP report here.
