Economic Impacts of Global Warming Bill

Economic Impacts of Global Warming Bill





    
 
January 2007  – A global warming bill 
drafted to attract broad bipartisan support would have little 
impact on the U.S. economy but would do little to curb the 
nation's greenhouse gas emissions, experts told the Senate 
Energy Committee Wednesday. The hearing illustrated the 
difficulty Congress could have in constructing legislation to 
address global warming, despite the growing consensus that 
action is needed. 
"I am aware that many in the scientific community are warning 
us that something needs to be done," said Senator Pete 
Domenici, a New Mexico Republican and ranking member of the 
committee. "We still have a lot of questions before us, though 
… and it is clear to me that the development of a system of 
mandatory controls on carbon emissions could be a daunting 
task." 
The burning of fossil fuels, such as coal, oil, and gas, emits 
greenhouse gases into the atmosphere. The most prevalent of 
these emissions is carbon dioxide, a greenhouse gas that traps 
solar radiation and warms the planet. 
Indiana's coal-fired Rockport power plant emits greenhouse 
gases into the atmosphere. (Photo courtesy AEP)
Committee Chairman Jeff Bingaman, a New Mexico Democrat, 
convened the hearing to discuss recent analysis of his global 
warming bill by the U.S. Energy Information Administration, 
EIA. 
Bingaman said that he is committed to developing bipartisan 
climate change legislation that can pass the Congress this 
year. 
His plan would impose an annual economy-wide emissions cap 
based on reductions in greenhouse gas intensity - defined as 
emissions per dollar of Gross Domestic Product. 
Senator Jeff Bingaman of New Mexico, a Democart, chairs the 
Senate Energy Committee. (Photo courtesy Office of the 
Senator) 
The Bingaman bill includes an emissions trading program to 
lower compliance costs and aims to reduce greenhouse gas 
intensity by 2.6 percent annually between 2012 through 2021 
and three percent per year beginning in 2022. 
This measure of emissions reduction differs from that of the 
Kyoto Protocol, which requires 35 industrialized countries and 
the European Union to an absolute cut in the amount of 
greenhouse gases emitted of at least five percent from 1990 
levels in the commitment period 2008-2012. 
Based on a plan developed by the bipartisan National 
Commission on Energy Policy, NCEP, the Bingaman bill also 
includes a safety valve that allows companies to delay making 
reductions if costs are too high. 
Analysis of bill by the EIA shows will cost the U.S. economy 
less than one percent of annual GDP by 2030 and will lead to 
modest increases in energy prices. 
But emissions will continue to rise by nearly 25 percent 
between now and 2030 under the plan, according to the EIA's 
analysis. 
Daniel Lashof, a climate expert with the Natural Resources 
Defense Council, said the bill's targets are too timid. 
Daniel Lashof is a senior scientist with the Natural Resources 
Defense Council. (Photo courtesy Congressman John Olver) 
"Faster and deeper emission reductions are essential to 
prevent dangerous global warming," Lashof told the panel. 
NCEP Executive Director Jason Grumet told members of the 
committee that the intent of the plan is cut emissions without 
harming the economy, but acknowledged that it may be too 
modest. 
"There are opportunities to strengthen some aspects of the 
legislation while meeting the requirement not to harm the 
economy," Grumet said. 
But he cautioned that a more stringent approach could prove 
politically difficult and could mean "everybody goes back to 
their Kyoto corners and yells at each other for another 
decade." 
Anne Smith, an economist and vice president of the economics 
consulting firm CRA International, said the economic impact of 
the proposal is still significant, especially given the 
limited reductions in heat trapping emissions. 
"If this is all the draft bill would accomplish does it make 
sense to even incur this small cost?" Smith asked. "It has the 
cart, but not the horse." 
Traffic congestion in Boston, Massachusetts. Vehicles burning 
gasoline and diesel emit greenhouse gases such as carbon 
dioxide into the atmosphere. (Photo by Ian Britton courtesy 
FreeFoto) 
Smith criticized the proposal's provision to use the proceeds 
from auctioning some of the carbon allowances to set up a 
trust fund for research and development of technologies to cut 
greenhouse gas emissions. 
The provision fails to establish incentives that "align the 
motivations of researchers with finding the most 
cost-effective carbon emissions reductions," she told the 
panel. "It attempts to pick winners, an approach to research 
and development funding that has a long history of waste and 
failure." 
But the proposal received support from Jeff Sterba, president 
and CEO of PMN Resources, a New Mexico-based energy holding 
firm and one of 10 major U.S. companies to join with 
environmental groups this week in calling for national 
legislation to limit carbon emissions. 
The proposal is not perfect, Sterba said, but it is a 
realistic framework that sets up mechanisms to accelerate 
reductions as technology advances. 
"More than any other proposal the draft recognizes the limits 
of today's commercial technology and the economic risks 
currently associated with addressing climate change for my 
industry and our ratepayers," Sterba told the panel. "It 
should be the focal point of the climate debate in the 
Senate." 
Senator Bernie Sanders, a Vermont Independent, questioned 
whether the bill's targets are "commensurate with the 
magnitude of the threat." 
"We all want a strong economy," Sanders said."But on the other 
hand we don't want to see a planetary catastrophe." 
Vermont Independent Bernie Sanders (Photo courtesy ) 
Sanders has introduced legislation calling for an 80 percent 
cut in greenhouse gas emissions by 2050 - several other bills 
have been authored by lawmakers keen to see quicker reductions 
than those in the Bingaman proposal. 
The flurry of global warming legislation is more politics, 
than substance, according to Senator Larry Craig, an Idaho 
Republican. 
"The sense of urgency is the '08 election for a good many 
people," said Craig, who also raised concerns about Bingaman's 
proposal. 
"I'm not sure that I'm willing to accept a nose under the tent 
approach to cap and trade when it gets us so short a 
distance," he told colleagues. 
"I'm not surprised with [Lashof's] testimony that we need to 
do more," Craig added. "We probably do. But I am not going to 
shut down this economy to accomplish it and I'm not going to 
create an artificial market where there are winners and 
losers."