NCPA: Senate Climate Bill Would Be Costly, Ineffective

Push for "Cap and Trade" Ignores Lessons Learned by Rest of the World


DALLAS (November 1, 2007) - A global warming bill on the move in the U.S. Senate would needlessly slow economic growth and reduce the nation's ability to pursue other programs with bigger payoffs in terms of improved human health and welfare, according to H. Sterling Burnett, a senior fellow with the National Center for Policy Analysis (NCPA).  The bill, titled "America's Climate Security Act," would restrict greenhouse gas emissions from power plants, petroleum refiners, major manufacturers and natural gas supplied to both residential and commercial buildings under what is called a "cap and trade" mechanism.

"Back in 1997 the Senate took the sensible position that the U.S. should not adopt any climate treaty that would either harm the economy or that didn't include meaningful participation by major developing countries," said Burnett.  "Now the Senate is rushing to adopt a unilateral bill that violates both of those principles."

Under a cap and trade system, government establishes a cap on total emissions, and then auctions or gives allowances to the affected industries, allowing them to emit carbon dioxide at certain levels.  Companies are also allowed to trade their emission allowances among themselves, so that companies that can cost effectively cut emissions more than their allowed amount can sell their excess emission credits to others.  Over time, the annual emissions limits would decline. 

Burnett noted that an analysis of cap and trade proposals in general by the Congressional Budget Office estimated costs to the economy in tens of billions and perhaps hundreds of billions of dollars annually and concluded that the poor would bear the brunt of resulting higher energy prices. 

Further the European Union's cap and trade system has been a failure.  After implementing their system several years ago, energy prices increased to levels that forced the EU to issue more generous allowances, making the credits virtually worthless. As a result, their emissions continue to increase, rising by 1 to 1.5 percent in 2006.  By contrast, the U.S. last year experienced a 1.3 percent decrease.

Increasingly scientists are advocating geo-engineering approaches, as more immediate, cost-effective ways to reduce warming.  And politicians and analysts world wide are coming to embrace the need for adapting to future warming. 

"These responses, whether combined or separately, would do far more than cap and trade bills to reduce the harm from future warming - and would do so at a fraction of the cost," said Burnett.  "Maybe if the Senate took more than the single scheduled day of hearings, they could more adequately examine the implications of the proposal."