Public Policy the Waxman-Markey Cap-And-Trade

Public Policy

The Waxman-Markey cap-and-trade bill, proposed during the year 2009, has incurred considerable debate among all sectors of society. Most are against it and its projected economic costs to the country. Some critics go as far as claiming that the environmental benefits will in turn be minimal, while taxpayers, employees and businesses will suffer as a result of higher prices and lower productivity.

Although most critics therefore resist the bill for its ineffective cost to benefit ratio, some have conducted studies that appear to project greater benefits than such critics account for. Gregg Gethard (2009) for example cites a study by the Institute for Policy Integrity that suggests significant benefits in reducing the effects of climate change. Specifically the study focused upon determining the dollar value benefit to society in terms of avoiding climate change should the bill be implemented.

According to Gethard, the results found long-term benefits of between as much as $5.2 trillion and as little as $382 billion. When applying the mid-range value of $1.5 trillion to the cost estimate of the proposed bill -- in the range of $660 billion -- the benefits in fact provided would amount to $2.27 for ever dollar that is spent.

This however does little to appease those who currently benefit from the fossil fuel business. In states where these are significant attributes, the issue is particularly controversial. This is the other side of the coin. Should the bill be implemented, it is estimated that oil refining production in the United States would fall by 17% by 2030 (Gethard, 2009). A further effect is the purchase of foreign refined oil. It is estimated that the costs associated with this would nearly double by 2030. The cap-and-trade bill will result in lower supplies of refined oil, which would translate to higher prices.

The Washington Examiner (2009) highlights the issue from the employee and consumer point-of-view. Citing a provision for unemployment, job training and relocation benefits, the author questions the validity of the bill in terms of true benefits to society and to humanity as a whole. The implication appears to be that workers laid off as a result of higher energy prices will not be rehired as quickly as suggested by the promoters of the bill.

A further significant concern is the cost of the legislation to the taxpayer. According to the Examiner, Waxman-Markey will incur the most significant and most intrusive increase of energy tax requirements in the history of the United States. Critics suggest that the nation's GDP could fall by as much as $7.4 trillion, while electricity and gasoline prices will skyrocket by 90% and 74%, respectively; this regardless of the fact that most Americans, as revealed by a survey, opposed energy bills that increased electricity and other energy bills even slightly. Implementing the cap-and-trade bill is therefore likely to have significant impacts upon the general well-being of the population, and the loyalty of the people to the government.

According to the article, energy sources such as oil, coal and natural gas are relatively cheap in comparison to their alternative "green" counterparts. The proposed bill would force companies and individuals to switch to more expensive sources of power by raising the prices of existing sources significantly. This is specifically dire news for the country's economy, especially during the recession. The article suggests for example that higher energy costs would result in higher costs for all consumer products as a result of higher production costs. This will affect the economy significantly. Furthermore, job losses will be an inevitable part of this process. Those in the energy industry will be forced to seek their livelihood elsewhere. The article projects that any new jobs relating to the "green" industry will more than likely be of the low-paying, manual variety.

In addition, many critics are of the opinion that there is not enough research evidence to suggest that the bill will significantly benefit the environment. The economic loss and suffering of American citizens, according to these critics, is simply not acceptable in the light of the relatively low level of benefit to the environment. The article goes as far as stating that the resulting reduction in global warming by the end of the century could e as low as two-tenths of a degree. Making the cost far higher than any immediate or indeed long-term benefit.

The Wall Street Journal (2009) confirms this opinion. The article states that the general drop in GDP because of higher energy prices will inevitably lead to some companies moving their business overseas, where energy costs are more sustainable.

The article cites results found by the Heritage Foundation when analyzing the Waxman-Markey proposal. The analysis entailed a comparison of the economy with and without carbon tax. If implemented, the bill would amount to a cost of $!61 billion to the U.S. economy in 2020. This relates to an average of $1,870 for a family of 4, rising up to $6,800 by 2035.

The most significantly inherent danger of the bill is the way in which these costs would affect the poor. Not all families are equally affluent, and the cost to the economy would be felt most strongly by less well-off families. On a wider scale, whole communities, regions, and populations could be affected severely, where the general poverty level is high compared to that in the rest of the country.

In addition, the estimates do not take into account the various effects of the bill on states that rely on manufacturing and coal production as opposed to service and hydro or natural gas for their income. There would be a diversity of more and less severe results of the bill. None of these have been carefully reviewed or investigated before proposing the bill. The danger is that already poor Americans would suffer even more for an environmental effect that is not proven scientifically to be valid or even very likely.

Furthermore, the nature of the country's economy will change dramatically if the bill is implemented, with energy-producing companies and states being in danger of either closing down or losing a significant amount of income. To propose a bill that will definitely have an adverse effect upon the economy for projected environmental benefits that can only be guessed at best, appears to be a somewhat unwise measure. Indeed, the Wall Street Journal article suggests that the cost estimates proposed by politicians are as unreliable as the politicians themselves.

Instead, it is suggested that countries where carbon legislation is already in place should be investigated for a comparison of the advantages and less desirable effects of such legislation. The article mentions the example of Britain. According to the Taxpayer Alliance in the country, the average British family is already paying $1,300 per year in green taxes, indicating that such taxes do not benefit the pocket of the consumer as much as suggested by proposals such as Waxman-Markey.

Although it is important to launch initiatives for the benefit of the earth and long-term environmental sustainability, I do not believe that this should be done at the expense of the public good or wide-scale human lives and livelihoods. The Waxman-Markey bill appears to be a hastily constructed initiative that has not enjoyed thorough attention by the appropriate experts and researchers. Indeed, politicians do not truly have the skills and knowledge required to make a success of initiatives to promote sustainability. Furthermore, it appears that only minimal research has been conducted into both the economic and environmental effects of the bill. Hence the widescale controversy and disagreements on the specific benefits and costs of the proposal.

Before therefore implementing Waxman-Markey, or any similar legislation, expert researchers from at least two sectors of society should be recruited to investigate the issues involved. Economic and environmental advisers should for example conduct a thorough and in-depth study of the benefits and costs of the bill. Results can then be used to optimize the benefits and minimize the costs. Economists for example should also research the effect of the bill on specific sectors of the nation, such as the poor, and those who depend upon specific energy industries for their wealth. If such research is used to demonstrate to the public the specific projections for the future by means of a generally available report, it may be easier for citizens to accept any sacrifices that need to be made.