May 13, 2010
by Diana Furchtgott-Roth
Senators John Kerry (D-MA) and Joseph Lieberman (IND-CT) claim that their new energy bill, the American Power Act, would save the environment. What they don't tell you is that it would powerfully destroy jobs.
The Congressional Budget Office is more honest. Last week it issued a report entitled "How Policies to Reduce Greenhouse Gas Emissions Could Affect Employment." The report concluded that "job losses in the industries that shrink would lower employment more than job gains in other industries would increase employment, thereby raising the overall unemployment rate."
With the national unemployment rate now 9.9%, Americans are concerned about their job prospects and those of friends and neighbors. Polls show that many believe that reducing global warming, the so-called benefit of lower greenhouse gas emissions, is less important than economic growth. With the slowdown in many measures of global warming over the past decade, it's an inconvenient truth that climate change is playing second fiddle to jobs.
Adding to the public's skepticism are leaked emails from the University of East Anglia in November 2009 showing the destruction of original global temperature data and the suppression of research papers authored by global warming dissenters. Americans are no fools - they know that no reduction in global warming will occur if America reduces greenhouse gases without similar action by China and India, and these countries have not agreed to comparable steps.
The Kerry-Lieberman bill is the Senate companion to the climate change bill that the House passed last summer, the American Clean Energy and Security Act of 2009, cosponsored by Henry Waxman, Chairman of the House Energy and Commerce Committee, and Edward Markey, Chairman of the House Energy and Environment Subcommittee, both Democrats.
Senator Lindsay Graham, an influential South Carolina Republican, was originally one of the cosponsors of the Senate bill, making it nominally bipartisan and giving it a greater chance of passage. But he dropped his sponsorship at the end of April.
On Wednesday, Mr. Kerry issued a statement saying that "It is time for Democrats, Republicans, and Independents to come together to pass legislation that will create American jobs and achieve energy security, while reducing carbon pollution by 17 percent in 2020 and by over 80 percent in 2050."
The bill requires that the country's total greenhouse gas emissions in 2013 be 5% lower than 2005 levels and that levels in 2020 be 17% lower - even as the economy, one hopes, has been expanding - and that by 2050, emissions be 80% below the 2005 baseline.
Representative Joe Barton, ranking member of the House Energy and Commerce Committee, declared, "And just like with Waxman-Markey, we'll need to crash dive the economy back to something resembling the 1870s in order to reach the anti-global warming targets that Kerry-Lieberman sets for 2020, 2030, and 2050."
Indeed, it's not technologically possible to meet these goals now without radically reducing the American standard of living. The bill's sponsors appear to believe - or hope - that passage of the law will inspire technology to appear as needed. The bill contains numerous grants to "eligible partnerships" to develop such technology, as well as to study the fields of clean and renewable energy.
The mechanism for achieving the bill's proposed, ambitious goals for emissions reduction is standards for power plants, heavy industry, and transportation, and a "cap-and-trade" program beginning in 2013.
Under this new, far-reaching regulatory regime, Environmental Protection Agency politicians, in consultation with other Cabinet agencies, would issue regulations within a year governing the allocation of allowances to emit greenhouse gases.
The bill would require EPA to shrink allowances steadily to 2050. When any year's emissions exceed a firm's cap, it would have to purchase allowances from the government or other companies. That is a tax under another name, driving up costs that would be passed on to consumers.
Supporters of the bill claim that the new regulations will create jobs as more Americans are employed to produce new emissions-suppressing technology. But funds for new capital expenditures have to come from somewhere, and the costs are passed to consumers in the form of higher prices.
Not only does the bill penalize American firms through higher costs of production, it causes jobs to be created abroad through required investments in wind turbines and solar panels, now commonly manufactured in China. But carbon-intensive sources of energy such as coal and oil, which are disfavored by the bill, are produced domestically and employ American workers.
The CBO report shows that emissions reduction programs would cause job losses in coal mining, oil and gas extraction, gas utilities, and petroleum refining. In addition, workers' wages adjusted for inflation would be lower than otherwise because of the increase in prices due to a cap and trade program. CBO concludes that some workers, therefore, would leave the labor market, because at the new lower wages they would prefer to stay home.
Any reader of the CBO report would realize that it's not in the interests of American workers to embark on an emissions reduction program with our current high unemployment rate. According to CBO, "While the economy was adjusting to the emission-reduction program, a number of people would lose their job, and some of those people would face prolonged hardship." Workers laid off in declining industries would find it hard to get new jobs.
The CBO report points out that "In cases in which a shrinking industry was the primary employer in a community, the entire community could suffer." The tax base would dwindle and real estate would lose its value as unemployed workers moved elsewhere. The community's personal income would diminish and real estate values would fall as the jobless moved away.
Despite the creation of 290,000 jobs in April, the unemployment rate stands at 9.9%, higher than the United Kingdom, Canada, and even Germany and Italy. When given a choice between the ephemeral benefits of carbon reduction and jobs that pay for rent and groceries, out-of-touch politicians might choose Kerry-Lieberman. But, for most Americans, jobs win every time.
Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor, was a Senior Fellow at Hudson Institute from 2005 to 2011.
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