FOIA and the Treasury Department—Climate Change Policy Could Cost As Much As All Other Environmental Regulations Combined


How much will global warming policies cost, especially the imposition of carbon rationing through cap-and-trade schemes? Various estimates have been bandied about by proponents (hardly noticeable) and opponents (extremely painful). Competitive Enterprise Institute Senior Fellow Christopher Horner filed a Freedom of Information Act (FOIA) request with the Department of the Treasury to see what estimates it had come up with. He received Treasury's FOIA response last week. What the internal memos reveal and conceal is telling: 

While such a program can yield environmental benefits that justify its costs, it will raise energy prices and impose annual costs on the order of __________________________ dollars. At the same time, given the Administration's proposal to auction all emissions allowances, a cap-and-trade program could generate federal receipts on the order of $100 to $200 billion annually. Finally, by encouraging investments in clean energy sources, climate policy could increase the fiscal cost of existing energy tax provisions, such renewable electricity and bioful tax credits. 

Growing political momentum around the issue of cimate change raises the likelihood that the U.S. will enact a policy in the near term. Economic costs will likely be on the order to 1% of GDP, making them equal in scale to all existing environmental regulation.  …

Emission allowances under a cap and trade system are valuable assets regardless of their allocation method (analogous to revenue under an equivalent tax policy)….

One advantage of auctioning allowances is the potential for generating large revenues ___________________________ that could be used to offset distortionary taxes on labor and capital, improving the economic efficiency of the tax system and reducing overall compliance costs to the economy. 

Domestic policies to address climate change and the related issues of energy security and affordability will involve significant costs and potential revenues,________________________________________________


In reading over the various memos supplied by Treasury, one finds that generally cost estimates are redacted. The cover letter says that these redactions are done pursuant to FOIA (b)(5). According to this FOIA subsection, information can be withheld when it involves …

… inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency;…. 

The U.S. Office of Special Counsel explains that this subsection authorizing the withholding of information from the public generally applies to attorney work product involved in litigation. Frankly, I don't see how this exemption is relevant to these memos, but I am certainly not schooled in FOIA legal arcana.

Read those portions that Treasury allows you to see here. Read why policy nihilism may be the only rational response to climate change here.

Disclosure: I used to be an adjunct scholar at CEI. 

Addendum: Over at the CBS News Taking Liberties blog, Declan McCullagh reports some rough calculations based on the new Treasury FOIA documents which suggest how much carbon rationing might cost Americans:

A previously unreleased analysis prepared by the U.S. Department of Treasury says the total in new taxes would be between $100 billion to $200 billion a year. At the upper end of the administration's estimate, the cost per American household would be an extra $1,761 a year. …

Because personal income tax revenues bring in around $1.37 trillion a year, a $200 billion additional tax would be the equivalent of a 15 percent increase a year. A $100 billion additional tax would represent a 7 or 8 percent increase a year. 

McCullagh also notes some other cap-and-trade cost estimates:

House Republican Leader John Boehner has estimated the additional tax bill would be at $366 billion a year, or $3,100 a year per family. Democrats have pointed to estimates from MIT's John Reilly, who put the cost at $800 a year per family, and noted that tax credits to low income households could offset part of the bite. The Heritage Foundation says that, by 2035, "the typical family of four will see its direct energy costs rise by over $1,500 per year." 

Go here to read the complete post.