Cap-and-Trade Will Cost Jobs, Slow Economy, Produce Few Results

February 11, 2008

Cap-and-Trade Will Cost Jobs, Slow Economy, Produce Few Results

Sensenbrenner: Focus on Technology is a Better Approach

Madison, Wis.,Feb. 11, 2008- U.S. Rep. Jim Sensenbrenner, R-Wis., ranking Republican on the House Select Committee on Energy Independence and Global Warming, delivered the following speech today at the WisPolitics.com/WisBusiness.com “Coping with Climate Change” conference:

“There’s a calamity on the horizon. All of the evidence points to it. There’s a growing consensus, and we all better get ready to do something about it. 

“The future is bleak. Billions of dollars will be lost, lives will be affected. 

“Do my words alarm you? 

“They should, because I’m talking about a major threat to our economy, one that stands to sweep away millions of jobs with hurricane force. 

“I’m talking about something called cap-and-trade, and I consider it as much a threat as global warming. 

“Let me take a step back and explain myself. We all know that global warming is real and that it’s an issue we should take seriously. 

“But we should also approach global warming wisely. I hope my opening was alarming, it was meant to be. I was merely borrowing from the tactics of some, like former Vice President Al Gore, who seek to scare us so badly about global warming that we might cause more damage in a vain effort to fix it. 

“While there is some scientific consensus that global warming is happening, there isn’t a lot of consensus about exactly what the impacts are and what to do about them. 

“In Congress, there is clamoring for a legislative solution and some members think they have found one in a cap-and-trade system. What they’ve found is a job killer. 

“I think there’s a better approach, and as the ranking Republican member on the House Select Committee on Energy Independence and Global Warming, I hope to help Congress find one. 

“I’m relying on four key principles to guide me. Any global warming legislation must: 

  • Produce tangible and measurable environmental results;
  • Advance technological progress;
  • Protect jobs and the economy; and
  • Rely on international participation, including China and India.  

“I have seen firsthand the extreme and misguided efforts to fight global warming that didn’t rely on these principles. As the former Chairman of the House Science Committee, I led the congressional delegation to the Kyoto treaty negotiations in 1997, and then led two delegations to subsequent meetings. 

“The Kyoto treaty mandated greenhouse gas emission reductions that were unreasonable. Many nations chose cap-and-trade as a system to meet this goal. It has given us a chance to study this system. The early results are not good. 

“But before discussing cap-and-trade, let’s talk briefly about the problem we are trying to solve. 

“There is much made of a scientific consensus on global warming and its causes. But often, what we are led to believe to be consensus is not what it seems. Perhaps the best example is the current scientific debate over sea level rise. 

“I suspect many people do not know that the Nobel Peace Prize winning U.N. Intergovernmental Panel on Climate Change does not at this time predict a dramatic rise in sea level. In fact, last year’s IPCC projections are not even close. Where Al Gore says 20 feet, the IPCC forecasts 20 inches. But Al Gore won the Nobel Peach Prize for showing images of Manhattan and Florida underwater in his movie. 

“That doesn’t sound like consensus to me. 

“Shouldn’t we rely on sound science, not alarmist fears, before we take measures that could cost millions of jobs and billions of dollars?  

“I think we need a better approach, one that is based on technological advancement and adaptive management.  

“Unfortunately, this is not the approach Congress is currently considering. 

“Under cap-and-trade, a total cap is placed on the amount of carbon dioxide emissions and economy-wide allocations are given or sold to emitters. Companies that are able to keep their emissions under their allocation can sell their savings, or credits, to companies that could not. Year after year, the total cap will be ratcheted down, with the goal being lowering greenhouse gas emissions. 

“It sounds simple. It is not. And it has the potential to do significant harm to Wisconsin.

“As the cap on greenhouse gas emissions is brought lower and lower, it will cause electric rates in many places to go higher and higher, especially places that rely on coal for electricity generation. Guess what? Wisconsin gets nearly two-thirds of its electricity from coal. 

“Cap-and-trade will punish states like Wisconsin for their coal use, and the punishment will be delivered in the electric bills of every home and business in the state. For example, in a regional cap-and-trade system, states like Illinois which has higher energy supply from coming from non-fossil fuels would receive benefits from states like Wisconsin. 

“How will Wisconsin compete with our neighboring states if electricity costs more here than in places like Illinois? I’m very worried that we won’t be able to compete under cap-and-trade. In fact, I would say I’m alarmed. 

“The Senate is currently considering cap-and-trade through a bill called America’s Climate Security Act of 2007. Unfortunately, this bill offers little security at all. Jobs in the U.S. will not be secure, the economy will not be secure and even the climate won’t be secure under this approach. 

“A recent analysis of this legislation by the Charles Rivers Associates shows that by 2020, up to 3.4 million jobs could be lost nationwide, and that takes into account the potential of new so-called ‘green’ jobs created by a regulatory focus on environmental technologies. 

“Actually, it may not be accurate to say that all of these jobs will be lost. Some will go to places like China, India, and Brazil, where there is no cap-and-trade.  

“Overall, this legislation would decrease the United State’s average gross domestic product by 1.1 percent to 1.6 percent by 2015, and GDP loss could grow to 2.5 percent after that. 

 “This amounts to economic costs of between $160 billion to $250 billion by 2015, and potentially, up to $1 trillion, according to this analysis. That’s more than we are currently spending on Social Security. 

“By 2015, this legislation would add $800 to $1,300 to the average American household budget each year. Additionally, the analysis predicts an increase of wholesale electricity prices of between 36 percent and 65 percent by 2015 and by 2050, 80 percent to 125 percent. 

“Another concern I have with cap-and-trade is, ironically, it hasn’t even shown it can produce significant reduction in greenhouse gases. 

“Across Europe, greenhouse gas emissions have risen 0.8 percent since implementing a cap-and-trade system in 2005, according to an analysis by Open Europe, a London-based group.  

“Some countries have seen their emissions continue to jump, notably including Italy and Spain. In fact, it was recently reported that Japan, Spain and Italy together may be forced to buy $33 billion in credits in order to reach compliance with the Kyoto treaty. That’s not chump change. 

“Part of Europe’s failings can be blamed on their system of carbon credits, which are awarded for reductions in CO2 emissions. In many cases, this is simply an effort to receive credit for emissions reductions being made in other parts of the world, and sometimes for projects that would have occurred anyway. 

“By placing a heavy reliance on credits, many European nations are simply outsourcing their greenhouse gas reductions to other nations. The U.K. estimates that two-thirds of its future emission reductions will occur not just outside of the U.K., but outside of the European Union. 

“For instance, a dam project in China was awarded $30 million in credits, despite the fact that project was already near completion, and had already been given a loan by the Asian Development Bank. 

“The U.S. House of Representatives had to rely on carbon offsets to complete its ‘greening’ of the capitol effort.  In order to make the House ‘carbon neutral,’ the Democratic-led House had to spend $89,000 of taxpayer money on offsets that the Washington Post found to be very questionable. In one case, farmers were paid to practice no-till farming, which reduces the release of carbon dioxide from the soil. The problem is farmers were already using this practice, partly because it brings in federal soil-conservation funds. And this was not the only case. 

 “Will Wisconsin taxpayers have to buy credits from states like Illinois to meet the demands of a cap-and-trade bill? I hope not. 

“Offsets also threaten to slow the pace of technological development.

“Because it is obvious that industries that must meet a carbon cap will turn to offsets first.  Claiming carbon credits don’t get your company any closer to being more energy efficient or making other important technological changes. 

“Cap-and-trade also won’t ensure that China and India are part of the solution, which they must be. 

“It was projected last year that the CO2 emissions of China have now exceeded those of the United States. Yet some argue that China and India, another significant emitter, should be exempt from international efforts to reduce greenhouse gases, even as the U.S. moves forward with binding cap-and-trade. 

“If the science says we must reduce greenhouse gases, how can the nation leading the world in CO2 emissions be given a pass? 

“Leaving China and India out will also undermine job security in the United States. When a cap-and-trade system significantly raises energy prices, which it will, could you blame manufacturers from moving to Asia and taking the jobs with them?  

“Also, exempting China and India defies political reality. The U.S. Senate voted 95-0 in 1997 for a resolution that demanded any global warming treaty be international in scope. The Kyoto treaty did not honor that requirement. 

“Seeing this, President Clinton decided not to send the Kyoto treaty to the Senate for ratification. And there are already many signs from both Democrat and Republican members of Congress that any cap-and-trade bill that doesn’t somehow bring India and China into the fold will fail. If cap-and-trade doesn’t somehow include China and India, I will work to ensure it fails. 

“So, in conclusion, let’s ask ourselves if cap-and-trade meets my criteria? 

“Will a cap-and-trade system create measurable, tangible improvements to the environment? So far, we’ve seen Europe’s greenhouse gas emissions rise under a cap-and-trade system. 

“Will a cap-and-trade system promote technological advances? As long as cheap and questionable offset projects are a part of the system, there will be little incentive to adopt new technology. 

 “Will a cap-and-trade system protect jobs and the economy? I would hardly say millions of projected job losses is protecting the economy. 

“Will a cap-and-trade system include international participation? It will have to if it is to have any hopes of passing the U.S. Congress. 

“Significant greenhouse gas reductions will occur only when the technology is readily available and relatively inexpensive. That includes renewable technologies like wind and solar power. But that should also include proven greenhouse gas reducing technologies like nuclear power, which supplies about 20 percent of Wisconsin’s electricity. Technology and adaptation to change is where our focus should lie. 

“That is a better approach.” 

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Select Committee on Energy Independence and Global Warming - Republicans
H2-344 Ford House Office Building
Washington, D.C. 20515
Phone: (202) 225-0110 | Fax: (202) 225-0095

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