Crony Capitalists Exploiting Consumers and Economic Growth

The recently introduced carbon rule from the Environmental Protection Agency is crony capitalism run amok. If the proposed rule goes into effect, which is not a certainty, companies who profit from influencing regulations will be the winners. Those who are guided by the marketplace, including consumers, will be the losers. Of course, the Obama Administration might be using the prospect of this rule to build support in the business community for a carbon tax.

If the Obama Administration’s primary objective is to retire old coal fired plants, there are better ways of achieving that objective. The reason so many remain in operation is an anomaly of the Clean Air Act that has been recognized for decades. An alternative, such as providing incentives to switch to gas and using combined cycle combustion in exchange for retiring these old plants, would be more cost-effective and would produce clear environmental benefits.

If the objective is to make significant reductions in greenhouse gas emissions, the rule will be a very costly waste of resources. This conclusion is not the result of computer models or sophisticated economic analyses. It is based on the empirical evidence that has been generated within the European Union. EU nations, especially Germany, have pursued a green agenda for almost two decades. It produced economic ruin not only in countries like Spain and Italy but also in Germany, the strongest EU economy. Energy intensive industries like steel and aluminum are no longer profitable and chemical and auto investment—BMW for example—are moving to the US that has much lower energy prices. Germany has the highest electricity prices in the EU which not only penalizes industry but puts a heavy burden on consumers. German economic growth has been anemic at best.

Bjorn Lomborg in a 2012 article stated, “Germans have paid about $130 billion for a climate-change policy that has had no impact on global warming. They have subsidized Chinese jobs and other European countries’ reliance on dirty energy sources. And they have needlessly burdened their economy. As even many German officials would probably attest, governments elsewhere cannot afford to repeat the same mistake”.

Analyses of the proposed EPA rule have estimated that it could cost over $50 billion a year and reduce employment by over 200,000 jobs annually. Environmental advocates claim that these are typical industry exaggerations. But, the EU experience undercuts their arguments.

The President claims that the US must lead the way so that other countries like China and India will be encouraged take appropriate climate actions. Those and other emerging economies are attempting to raise their standards of living and achieve higher levels of sustainable economic growth. Can anyone really believe that they will sacrifice that to chase an environmental illusion? The Chinese must be thrilled at the prospect of us inflicting damage on our economy.

Ironically, the US has been doing quite well in reducing emissions thanks to innovation, private investment, and the natural gas boom. Our emissions are below the 2005 level and EIA projects that they will return to that level before 2030. How many other countries can match what we have accomplished.

What we know about climate change as a result of the latest IPCC report is that climate sensitivity—the effect on temperature from doubling CO2—keeps getting reduced, climate models which are the source of gloom and doom cannot replicate the halt in temperature increases over the past 17 years, and science still cannot separate the human influence from natural variability. Climate orthodoxy is simply a Trojan Horse masking an extreme environmental agenda.

The solution for whatever climate we may experience in coming decades will come from achieving much higher levels of economic growth and encouraging more private investments in technology and innovation.

Originally published by the National Journal at http://www.nationaljournal.com/policy/insiders/energy/winners-and-losers-in-the-climate-rule-20140602.

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