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Waxman-Markey: Coercion for its own sake

Most media coverage of H.R. 2454, the American Clean Energy and Security Act  of 2009 (ACES), focuses on the bill's cap-and-trade program and the free rationing coupons (emission allowances) that the bill's co-sponsors, Reps. Henry Waxman (D-CA) and Ed Markey (D-MA), had to hand out to utilities and other interests to secure their support for the legislation.

But the cap-and-trade program occupies only one of four of the bill's main sections ("titles").  Other titles contain a host of mandates and "incentives" (carrots and sticks) to reshape energy and transportation markets.   

ACES, for example:

  • Requires utilities to meet a certain percentage of their load with electricity generated from renewable sources, like wind, biomass, solar, and geothermal.
  • Promotes small-scale "distributed generation" of renewable electricity by offering three renewable electricity credits (instead of one credit) for each MWh produced.
  • Authorizes electric power generators to create a Carbon Storage Research Consortium with the power to assess "fees" (aka taxes) totalling approximately $1 billion annually to fund carbon capture and storage (CCS) demonstration plants.
  • Directs the EPA Administrator to hand out free rationing coupons to subsidize CCS.
  • Establishes a CCS mandate requiring new coal-fired power plants to emit 65% less carbon dioxide if permitted after 2020, and emit 50% less if permitted between 2009 and 2020; also requires EPA to review these standards not later than 2025 and every five years thereafter.
  • Requires utilities to "consider" developing plans to support electric vehicle infrastructure, and provides assistance (including free emission allowances) to subsidize electric vehicles and infrastructure.
  • Mandates stricter building codes achieving 30% higher energy efficiency in 2010 and 50% higher in 2016 for new buildings, and establishes a "building retrofit program" for existing residential and nonresidential buildings.
  • Mandates tougher energy efficiency standards for indoor and outdoor lighting, hot food holding cabinets, bottle-type drinking water dispensers, hot tubs, commercial-grade natural gas furnaces, televisions, and other appliances.
  • Requires the President, EPA, the Department of Transportation (DOT), and California to establish greenhouse gas (GHG)/fuel economy standards for new passenger cars and light trucks.
  • Requires and sets deadlines for EPA to establish GHG emission standards for heavy-duty engines and vehicles and non-road vehicles including marine vessels, locomotives, and aircraft.
  • Requires States to establish goals and submit transportation plans to reduce transport sector GHG emissions, and imposes sanctions on States that fail to comply.
  • Requires the Deparment of Energy (DOE) to establish industrial energy-efficiency standards.

These measures are economically and environmentally irrational even if you believe that global warming is a "planetary emergency." As the Charles River Associates (CRA) report for the National Black Chamber of Commerce points out, the renewable electricity, CCS, electric vehicle, and energy efficiency mandates will not yield net emission reductions beyond what the bill's emission caps already require. The targeted interventions may accelerate GHG reductions in some industries or sectors, but that just allows emissions to increase elsewhere in the economy without breaking the cap.

The rationale for cap-and-trade is that it allows the market to find the least-costly methods of reducing emissions. By superimposing renewable electricity, CCS, electric vehicle, and energy efficiency mandates on that system, Waxman-Markey dictates the means as well as the goals.

There are two possible outcomes. First, which is exceedingly unlikely, the cap motivates reductions in exactly the same ways as the targeted mandates and incentives. In that case, observes CRA, the mandates “would waste resources on needless monitoring, measuring, enforcement and compliance.”

If, as almost certainly would happen, the mandates compel different actions and investments than industry would otherwise undertake to meet the cap, then the same emission reductions would be achieved at higher cost.  The targeted mandates and incentives “can only substitute more costly GHG cuts for those that could have been made at lower cost.”

So what is the point? Why tout cap-and-trade as an "efficient," "market-based" solution and then gunk it up with cookie-cutter, command-and-control measures?

Several reasons come to mind including deep distrust of markets, an abiding belief in old-fashioned central planning, the desire to rig market outcomes to benefit or punish certain interests, and the desire to create more work (endless full employment) for bureaucrats and lawyers.

One that should not be discounted, though, is the pleasure some people derive from placing their heels on other people's necks. Politics is chiefly about the organization and application of power. It tends to attract people who enjoy bullying and coercing others. To regulate is to coerce. Command-and-control regulation is more coercive than the market-based variety. So despite their real or feigned enthusiasm for cap-and-trade, many climate activists are hopelessly addicted to mandates.