The Wall Street Journal’s editorial board, continuing its march against government-imposed limits on carbon emissions (see here and here for examples), has added another misleading commentary to the ongoing discussion about a cap-and-trade system. This time it alleges that there is “evidence” that the Obama administration “understands” how damaging carbon regulations will be, but is pressing ahead with them anyway.
What is this smoking gun unearthed by the Journal? It’s that the White House is currently reviewing the Environmental Protection Agency’s April finding that carbon dioxide is a dangerous pollutant, and thus subject to regulation under the Clean Air Act. The Journal says that because the Obama administration is taking steps to exempt small emitters such as hospitals and bakeries from the regulation (by raising the pollution level at which the EPA is required to step in), we now have evidence that the White House is aware that limits on greenhouse gas emissions will hurt the economy. The Journal asks, “If the green future is going to be so bright, why does the White House want to exempt so many businesses from its glories?” Well, because it understands smart policy.
Regulation of greenhouse gas emissions is most efficient when directed upstream, such as at power plants or refineries, through which fossil fuels enter the economy. The idea is to go after the big polluters, which give you the most bang for your buck, and thus minimize administrative and bureaucratic costs because fewer companies interact directly with the system. This is the approach behind the House’s proposal for a cap-and-trade system in its version of the climate and energy bill that’s still working its way through the Senate. The House’s Waxman-Markey bill would cap only the largest emitters (responsible for greater than 25,000 tons of carbon dioxide equivalent per year) but would still cover about 85 percent of all domestic emissions.
The assessment of emission limits by the Journal’s editorial board is plainly near-sighted, ignoring how policies that untether the economy from fossil fuels could deliver benefits to households and businesses over the long term. By encouraging the more efficient use of energy, businesses of all sorts would gain from new technologies that help them produce more from less. By switching over to domestically produced renewable sources of energy, U.S. consumers could avoid the periodic price spikes we now experience with oil.
The op-ed ignores these factors. It also fails to acknowledge the potential revenue from sales of emissions allowances, a chunk of which the Obama administration wants to be invested in energy-efficiency projects. These types of projects can save consumers about $3 for every $1 invested, according to the nonprofit policy group Environment Northeast. Under the Waxman-Markey bill, electric and natural gas distributors would be given emission allowances for free in the early years of the program but would be forced to spend much of that revenue on efficiency projects, helping to reduce energy demand, emissions and utility bills for households and businesses. System wide effects of reduced energy consumption over time could also help drop wholesale energy prices and peak demand — not to mention improving the reliability of the power grid.
Perhaps the biggest oversight in the Journal editorial is the failure to mention the long-term consequences of climate change. One of the most comprehensive analyses of the economics of climate change to date — the Stern Review, which was commissioned by the UK government — found the lower-bound estimate for the cost of no action was the equivalent of losing 5 percent of global GDP per year. If that’s not bad for business, what is?
Such oversights wouldn’t be so angering if they were confined to this one article. But the Journal’s editorial team has made a habit of one-sided commentary on efforts by the Obama administration and legislators to reign in emissions and promote alternatives to fossil fuels. It’s one thing to scrutinize policy proposals and point out inadequacies and failures — the editorial board is entitled to an opinion — but it’s another to be so blinded by ideology that you draw illogical conclusions and ignore significant benefits. In the end, readers, and ultimately society, lose when such influential opinions are based on tainted analysis.