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LISTEN NOWThe Freedom Files Podcast Episode 54: David BahnsenListen Here


What Will Copenhagen's Failure Mean for U.S. Energy Policy Going Forward?


For those of you who aren’t particularly familiar with what ensued at the recent December 18, 2009 Copenhagen climate change conference, it was unequivocally unsuccessful. The initial goal of the conference was to discuss and hopefully prescribe a pragmatic solution to the globally increasing levels of man-made greenhouse gas emissions; particularly for China and the United States as the number one and two emitters of fossil fuels worldwide. However, without being able to collectively agree on a legally enforced emissions reduction blueprint, Copenhagen’s accomplishments were limited to two things: China reiterating their unwillingness to join the U.S. in accepting legally binding carbon targets, and an acknowledgement that the European Union’s carbon trading market is nothing but inefficient. Reason magazine views this lack of success at Copenhagen as a positive, as science correspondent and climate science watcher Ronald Bailey comments:

The good news for the rest of us is that the Copenhagen collapse provides the world with an opportunity to step back, reassess the political and scientific solutions, and find a better way than the deeply flawed Kyoto Protocol process to address problems associated with a warming planet.

Does this “Copenhagen collapse” mean that the U.S. will find a better way to address “problems associated with a warming planet?” Regarding U.S. energy policy going forward, it would certainly be in the best interest of the United States not to implement a cap and trade based system; the very system that has led to many economically negative, unintended consequences in Europe. Under the Kyoto Protocol, Europe created a carbon market, which Ronald Bailey notes, “…has been riddled with problems.” A cap and trade system in the United States would be similar to the carbon trading market in Europe. Given the economic inefficiencies and failures of the European model, why would President Obama and Democrats in Congress pursue this particular environmental initiative? After all, regarding carbon trading, President Obama noted at the Copenhagen conference:

Kyoto was legally binding and everybody still fell short anyway.

Rather than adopt a costly and unworkable cap and trade program, you would think that President Obama would safeguard the U.S. from the fundamental economic inefficiencies of a carbon trading market. Regarding the carbon rationing approach, Ronald Bailey writes:

Perhaps carbon rationing and higher energy prices will help us avoid a climate disaster. But these measures will increase rather than decrease unemployment. The carbon rationing proposals in Congress are not really jobs bills, a fact that will make them harder to pass.

Regarding what Americans can expect to see if cap and trade were to become law, the Heritage Foundation found the following:

• GDP will drop by an aggregate $9.9 trillion between 2012 and 2035. On a family-of-four basis, this translates to an income loss of over $108,000--a loss of over $4,500 per year.
• In 2014, employment will drop 365,000 jobs below the expected level and will not recover for the period analyzed. For the entire period analyzed, employment will average 1.4 million jobs below the no-legislation level. In some years, the employment deficit will exceed 2.5 million jobs.
• Household net worth will take continual hits. For the average year, it will be $2.1 trillion below baseline. On a family-of-four basis, the cumulative loss in net worth will exceed $40,000 by 2030.
• Gasoline prices will rise by 45 percent.
• Residential electricity prices will rise by 72 percent.
• Relative to the baseline, the higher prices will force families to cut gasoline consumption by more than 12 percent, natural gas consumption by 23 percent, and electricity consumption by 29 percent. But these cuts will not be enough to offset the higher prices completely, and a family of four will see its total energy spending rise by more than $1,000 per year by 2035--a total increase in energy expenditure of more than $16,000 between 2012 and 2035.

On top of the poorly functioning cap and trade in Europe, these economic projections should be a clear sign to cap and trade advocates that the massive new government program would impose significant costs for little or no benefit, particularly if China and other developing nations decline to participate in a greenhouse gas reduction program. Ronald Bailey expresses optimism when he describes the Copenhagen Conference as:

…one that could end up sparing the world from a costly and flawed scheme of global carbon rationing.

Creating a restricted, government enforced carbon market is a strategy that member countries at Copenhagen acknowledged as flawed and unsuccessful. Why then would we, the U.S., choose to implement costly cap and trade legislation that has proven to be inevitably flawed and unsuccessful? Hopefully a solution such as the Murkowski Resolution can stop the EPA from imposing  burdensome new regulations before Congress even has a chance to address the issue through legislation.  In recent months new concerns have been raised in Congress with respect to both the costs to consumers and the economy as well as the underlying science supporting the EPA’s desire to regulate. The resolution introduced by Sen. Murkowski would keep the EPA from making a power grab before Congress can fully vet the issue.