This was written as a research paper for a U.S. Senate simulation course. The actual bill refered to in the paper does not exist, but mirrors The Climate Stewardship Act of 2003 proposed by Senator Joseph Lieberman .

 

An Evaluation of a Cap and Trade System for Reducing Greenhouse Gases in the United States

By: Jeremy Seeley

            I am opposing USU.15, Polar Cap Preservation Act.  Currently, the United States has no formal policy regarding reduction of greenhouse gases, but the U.S. produces about 25% of the world’s carbon dioxide emissions.  What has been done in this area has been done on a volunteer basis.  USU. 15 would create what has been called a cap and trade solution to global warming. It would only directly affect sources that produce more than 10,000 metric tons of carbon dioxide, thereby covering about 85% of emissions in the U.S. (Senator John McCain) This policy would create a cap that would limit greenhouse gas emissions then allow companies to trade pollution rights.  Companies who are below the cap would be allowed to trade or sell their breathing room to other companies who have not yet met the emissions standards.  In addition, some companies who reached compliance before the enactment of the bill would be given, or grandfathered, trading allowances.  Other pollution credits would be auctioned off by the secretary of Commerce to offset rising energy costs and assist affected workers.  The bill would also provide a scholarship program at the National Science Foundation.  It would also create several research institutions to better study global warming. (Summary)

            This bill has gained support across party lines for several reasons. There is a growing fear across the globe of the repercussions of rising global temperatures. This bill is an attempt to move forward in counteracting this apparent threat. On the surface, USU.15 appears to be a bipartisan solution to an escalating problem. Placing a cap on greenhouse gas emissions has satisfied some environmental groups and garnished support for Democrats, while creating a market-based solution seems to meet Republican agenda of free-economy interest groups and Republicans.

            Primary criticisms of USU.15 come from both scientists and economists.  Besides being unnecessary, the biggest problem with this bill is the impact it would have on the economy.  Its economic costs are unknown, but it is estimated to cost billions of dollars each year and the returns are questionable.  Economists are also skeptical of the “market-based” solution because pollution trading is a contrived market and would be closely regulated by government bureaucracy, so it isn’t really market-based, it is bureaucracy-based.  In short, the bill takes us in an unknown direction, but doesn’t provide a real solution to the problem.  “An early start down a dead end street is not progress; it is wasted effort.” (Beckner) Another main problem with this proposal is that it would waste huge sums of money on a scientific unknown.

   Government interference in business probably isn’t even necessary in regard to greenhouse emissions.  Greenhouse gas emissions in the U.S. have been declining significantly over the past few years. (Senator Conrad Burns) Additionally, 31 major corporations are already reducing their emission on a voluntary basis as part of the EPA’s Climate Leaders Program. (Mahoney)

            Essentially, this bill will work just like an energy tax.  A cap is placed on emissions. If a company exceeds that cap, a fine is imposed or the company must buy a credit from another company that is below the cap.  A company would be allowed to satisfy 10% of its required reduction by purchasing credits from other domestic sources.  In addition, the company could satisfy an addition 15% by trading with international sources.  This would send billions of American dollars overseas.  “If enacted, McCain-Lieberman will have the same effects on consumers as an energy tax.” (Beckner) Although this bill would only directly affect large green-house gas emitters, the result of this tax for the average citizen will be an increased cost of energy and larger burdens on people with fixed incomes, like senior citizens and the poor. As companies pay money to meet the emissions requirements that would be established by the bill, their operating costs will increase and profits will decrease.  These companies will bridge this deficit by raising prices on manufactured goods and by cutting jobs.

But ultimately, any system that restricts emissions is restricting the nation’s access to energy. Market-based or not, choking the nation’s energy supply will have significant costs for the economy as consumers face higher prices and workers find themselves out of work in important sectors of the economy. (Brough)

 

The National Center for Policy analysis estimates that in order to reduce 2010 emission levels to 1990 levels, a loss of between $247 billion and $339 billion dollars would result.  That would cost the average American between $829 and $1,135.  USU.15 would mitigate these costs to some degree by moving the date to 2016 and allowing emissions trading, but the costs remain astronomical.  The plan would cost the American economy about $9 billion annually. (Pizer)

According to a Gallup pole, 81% of Americans favor tighter restrictions on emissions standards for business and industry, but 62% oppose any legislation that will limit use of energy by average consumers. (Environment) The rise in energy costs that would result from this cap and trade system would act as an energy use limitation for consumers.

            A few companies will benefit from this bill, but that benefit would further harm the economy through monopolization.  For a few years, a small group of companies have voluntarily cut their greenhouse emissions. As part of this experiment, they have developed technologies which have made their production cleaner.  If USU.15 is enacted, these companies will be able to sell their technologies to other companies at a profit.  In addition, they will be given, or grandfathered, tradable emissions credits to make up for their past efforts. From the very enactment of this bill they will have a monopoly on tradable credits in the new market.

            By calling USU.15 a market-based approach, it is implied that a free-market is used to fix the greater problem. Companies would willingly and freely trade and buy. This is absolutely not the case with USU.15. The bill would create a market for emissions trading by creating a new commodity. “This is not a market in the usual sense of the word; it is a regulatory regime that attempts to mimic a market. Important elements are controlled and defined by government, opening the door to political manipulation while expanding federal control over important sectors of the economy.” (Brough) In order to regulate the trade of these emissions credits, a larger governmental bureaucracy would be required.  This bureaucracy would have a large influence over the economy.

            This plan would cost the economy and American workers a lot of money.  The question, then, is what will be the returns?  Is it worth it?  In truth, no one knows.  This uncertainty can be traced to the scientific uncertainties related to global warming.  Most global warming theories dictate that human activity has increased the presence of greenhouse gases, primarily CO2, in the atmosphere.  This increase has resulted in a drastic increase in global temperatures.  The results of this temperature increase range from melting icecaps to animal migrations.  There are several problems with these theories. 

            Although we do know that carbon dioxide concentrations in the atmosphere are increasing, we can not be sure that global warming is occurring. “[The situation] today is that the warming, indeed, is much smaller than suggested by current models, if there is indeed warming at all.” (Lindzen) Although this observation was made a decade ago, the inaccuracy of all climate models that existed then, still exist today. According to the Environmental Protection Agency, the land surface temperature of the earth has risen about one degree Fahrenheit.  However, this observation cannot account for the declining temperatures found in many areas of the world.  In addition, the models generated by these observations cannot account for declining temperatures in the lower atmosphere and stratosphere. (Global Warming) These problems show that the models used to calculate temperatures cannot be trusted and must be revised.

            There is a wide acceptance of the global warming theory among climate experts around the world and those who oppose this theory are few in number.  Proponents of global warming theory point to this fact as further evidence of the truthfulness of the theory, but science is not determined or influenced by popular opinion.  It must be determined by the scientific method which relies on experimentation to determine the truth.  This has not been done with global warming.  The latest reports from the Intergovernmental Panel on Climate Change have received sweeping criticism from the scientific community for failing to use factual information to draw conclusions.  Among the mistakes of the panel are confidence intervals based on author consensus and using prior assumptions of questionable validity to build new assumptions.  In short, the report uses “garbage-in-garbage-out modeling” to draw pessimistic conclusions about global climate change. (Green)

            The importance of carbon dioxide to global warming is also questionable. The most common greenhouse gas is water vapor. In fact, water vapor contributes about 95 percent of the greenhouse effect, while carbon dioxide and the other greenhouse gases contribute the remaining five percent. (Macdonald) Man-made emissions contribute about 3 percent of carbon dioxide emissions.  (Brough) Human influence on greenhouse effect is minimal.  Vertical currents in the atmosphere further negate the affect of man-made greenhouse gases. 

The surface of the Earth cools bodily by motion that carries the heat around the bulk of the greenhouse gas and the radiation is emitted from upper levels which have much less infrared opacity. Thereby they circumvent about three-quarters of the greenhouse substance… Speaking of trapping of heat by greenhouse gases in the bulk of the atmosphere is no more impressive than the trapping of the Germans by the Maginot line – there are plenty of good ways of getting around it. (Lindzen)

 

So far, scientific models have not shown that human influence has affected the global temperatures.  The cause in the warming trend that has been observed in the past century remains a mystery and should be researched further using scientific means.

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Bibliography

 

Senator John McCain quoted in Science and Transportation Committee Hearing. “Proposal to Create a Mandatory Greenhouse Gas Emission Reduction.” Jan. 8, 2003. Found through Lexis-Nexis. March 18, 2003.

 

Senator Conrad Burns quoted in Science and Transportation Committee Hearing. “Proposal to Create a Mandatory Greenhouse Gas Emission Reduction.” Jan. 8, 2003. Found through Lexis-Nexis. March 18, 2003.

 

Mahoney, James quoted in Science and Transportation Committee Hearing. “Proposal to Create a Mandatory Greenhouse Gas Emission Reduction.” Jan. 8, 2003. Found through Lexis-Nexis. March 18, 2003.

 

 “Summary of Lieberman/McCain Draft Proposal on Climate Change.” United States Senator Joe Lieberman. January 8, 2003. http://www.senate.gov/~lieberman/press/03/01/2003108655.html (March 20,2003)

 

Beckner, Paul. “Kyoto Style Cap-and-Trade for the United States?” Citizens for a Sound Economy. January 27, 2003. http://www.cse.org/informed/issues_template.php/1238.htm (March 20, 2003).

 

Brough, Wayne T., Ph.D. A Rush to Judgement?” Citizens for a Sound Economy. Feb. 19, 2003. http://www.cse.org/informed/issues_template.php/1265.htm (March 18, 2003).

 

“Global Warming Policy: Some Economic Implications.” National Center for Policy Analysis. May 1999. http://www.ncpa.org/studies/s224/s224b.html (March 20, 2003).

 

Lindzen, Richard S. quoted in “Climate Experts Clash on Global Warming.” Technology Day. Massachusetts Institute of Technology. http://web.mit.edu/newsoffice/tt/1990/jun13/23271.html (March 22, 2003).

 

Environment: Major Proposals, Public Agenda Online. 2003. http://www.publicagenda.org/issues/major_proposals_detail.cfm?issue_type=environment&list=8 (March 20, 2003)

 

Global Warming – Climate – Temperature. Environmental Protection Agency. Jan. 9, 2003. http://yosemite.epa.gov/oar/globalwarming.nsf/content/ClimateTrendsTemperature.html

(March 20, 2003).

 

Green, Kenneth. “Newest IPCC Report on Global Warming Fails to Deliver Sound olicymaking Models” Reason Public Policy Institute. Feb. 27, 2001. http://www.rppi.org/rr101.html (March 22, 2003).

 

Pizer, William A. and Kopp, Raymond J. “Summary and Analysis of McCain-Lieberman ‘Climate Stewardship Act of 2003.’” Resources for the Future. Jan. 28, 2003. http://www.rff.org/Summary%20and%20Analysis%20of%20S.139%20by%20Pizer%20%20Kopp.pdf (March 20, 2003).

 

Macdonald, Norman, J. and Sobel, Joseph P. “Changing Weather?” Global Warming Information Page. http://www.globalwarming.org/science/accu.htm (March 24, 2003).