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The human costs of global warming policy
The human costs of global warming policy
October 01, 1997
Nine out of 10 Americans don’t know anything about U.S. global climate policy, according to a poll released in June 1997 by the Small Business Survival Committee. Yet, just a few months from now in Kyoto, Japan, U.S. negotiators may commit the American people to a climate change treaty that will require massive restrictions on energy use. Something is wrong here.
If we were at war — if we faced a physical threat to the U.S. — Americans at home would be asked to sacrifice, and we would willingly do so accepting gas rationing, canned food instead of fresh, and products in short supply. If we were facing an energy crisis as we did in the 1970s, people would willingly cut back on driving, car-pool, turn down their thermostats, and wait — sometimes impatiently — in long lines at gas stations. But something’s different with global climate change. The stakes are just as high, but the American public does not know what is going on and how this issue will affect them.
No Need for Hasty Action
Public debates on global warming policy often focus on the science of climate change. Yet whether warming is occurring is still in question; and, if global warming is occurring, the extent of mankind’s influence has not yet been clearly established. According to ground-level measurements, the earth’s temperature has warmed 0.5 degrees Celsius over the past century, and computer models predict an increase of nearly two degrees Celsius over the next 100 years. However, satellite data measuring the earth’s temperature show no temperature increase over the past 18 years; instead, they show a slight cooling trend. Also, as the computer models are adjusted and new data are incorporated, the predicted temperature rise has gotten smaller and smaller — from about five degrees Celsius over the next century to the current prediction of less than two degrees.1
Yet even with this high level of scientific uncertainty, policymakers are rushing to treat global climate change as an imminent threat. They use the mantra of the "precautionary principle," that is, if the possibility exists that global warming is occurring due to human activities, we need to take immediate action.
Opponents of precipitous action argue that given the scientific uncertainty whether global climate change is occurring, policymakers should not take drastic steps into the next century to restrict greenhouse gas emissions. They point to macro-economic models that show devastating effects on U.S. industries and resultant widespread unemployment as companies shift their production to developing countries not subject to treaty restrictions. Some critics of rigid emissions cutbacks note that such restrictions would hobble industry’s ability to adapt and find technological solutions if the science becomes more certain that the climate is being affected by man’s activities.
The Consumer Impact
Missing from the debate is how consumers will be affected by global climate change policies. The American public deserves to know what the global climate policy proposals are and what they will mean for them. The aim of this paper is to show how global climate policies’ effects on consumers will be real, substantial, and painful, and to illustrate the impact these proposals will have on their daily lives (see Exhibit 1, which shows typical energy consumption in daily routines).
Consider some of the proposals that are on the table. Some proposals for binding targets and timetables would sharply reduce greenhouse gas emissions by 15 to 20 percent below 1990 levels over time periods as short as 12 years. By the year 2000, the U.S. Department of Energy forecasts that U.S. carbon emissions will be 12.5 percent above 1990 levels. Thus, a 15 percent reduction in CO2 from 1990 levels by 2010 — the proposal being pushed by the European Union — would actually mean a 24.4 percent reduction in a single decade.
These massive changes can’t be achieved through minor reductions in energy use. People cannot simply turn up their air conditioner thermostats to 72 degrees from 70, or replace 75 watt light bulbs with 60 watt bulbs. Instead, the proposed Kyoto accord will require drastic reductions in energy use in every aspect of people’s every day lives.
Some approaches being discussed to reduce emissions are a carbon tax on fossil fuel emissions (from the burning of coal, oil and natural gas) and the currently favored "cap and trade" approach, that is, a form of energy rationing to restrict emissions to, say, 1990 levels or below, and the issuing of tradable emission permits.
The Clinton Administration, not surprisingly, has backed away from energy taxes: their impacts are too obvious and their costs too visible to the American public. There is clearly no desire among Clinton Administration officials to relive the experience of trying to get an energy tax through Congress as was attempted in 1993. As an internal 1994 Environmental Protection Agency (EPA) memo on global warming policy options concluded: "Energy taxes are likely to be unpopular and would require significant political capital to legislate; they might initiate some backlash against climate change and other environmental actions."
The same document, though, gave a nod to "market-oriented" alternatives with this assessment: "A cap would likely not be as unpopular as a tax, since people are generally less familiar with the concept." This statement, of course, also shows an all-too-common cynicism toward the American public — if people don’t know what’s happening, they can’t mobilize against it (Exhibits 2 and 3 list some proposals by the EPA and Department of Transportation to cut emissions).
Exhibit 1: Ways Americans Directly Use Energy in a Typical Day
Activity System/appliance/product Typical Energy Source o Waking up Clock/clock radio Electricity o Turning lights on Light fixtures Electricity o Showering or bathing Hot water heater Gas or electricity o Shaving; drying hair Electric shaver; hair dryer Electricity o Preparing coffee Coffee maker Electricity o Preparing hot breakfast Stove, toaster, microwave Gas; electricity o Doing dishes Hot water heater Gas or electricity o Taking kids to day care Automobile Motor fuel o Commuting to work Automobile; public transportation Motor fuel; electricity o Working in office Heaters or air conditioners; telephones, computers, printers, reproduction machines, postage meters Fuel oil or gas; electricity o Commuting from work Automobile; public transport Motor fuel; electricity o Picking up kids from day care Automobile Motor fuel o Grocery shopping Automobile Motor fuel o Storing fresh food; frozen food Refrigerator; freezer Electricity o Taking kids to soccer game Automobile Motor fuel o Turning lights on Light fixtures Electricity o Watching television; listening to stereo Television set; stereo Electricity o Kids’ doing research, writing Home computer Electricity o Preparing dinner Stove; microwave Gas; electricity o Dishwashing Hot water heater; dishwasher Gas or electricity; electricity o Washing clothes Washing machine; hot water heater Gas or electricity o Drying clothes Clothes dryer Gas or electricity o Sleeping - Heating or cooling Heating or air conditioning system Fuel oil, gas, or electricity
Other proposals include combining energy taxes with massive subsidies for "alternative technologies" — subsidies that will provide huge profits to the politically preferred companies — such as ethanol or electric cars, and "renewable energy sources," like windmills and solar panels. Electric cars sound good, but can you commute to work day in and day out in a car that’s less reliable, less comfortable, and, most importantly, less safe? Solar panels might work in San Diego, but what about in Seattle? Windmills might work in Wisconsin, but what about in Washington, D.C.?
So-called renewables or alternative energy sources would take years for widespread practical applications before they could be considered economically viable alternative energy sources. Many renewables would also require energy-intensive production for widespread use, which could result in environmental damage — for example, some solar applications could cause microclimate changes; wind towers can kill birds; hydro-power can damage habitats and certain fish. Indeed, both solar and hydropower projects have faced environmental opposition. Taxpayer subsidies for major government research and development in alternative energy sources, new technology, and energy efficiency is an increasingly popular option, even though such expansive programs in the past have produced little or no results.2
Electric cars have been an environmental dream for decades. The first electric car race in the United States was held near the turn of the century. Yet a practical battery-powered automobile has yet to materialize. Current models are neither durable nor are they affordable. Limited range, long refueling times, and the lack of infrastructure make the widespread use of electric vehicles highly unlikely at any time in the near future, even if the federal government shells out millions in subsidies or imposes electric vehicle sales mandates. Even a minor sales mandate, calling for only two percent of new vehicles sold to be electric, provoked fierce opposition in California and the northeastern United States.
Regulatory mandates and "technology-forcing" may be more politically palatable, but shifting from visible taxes to hidden regulatory quotas or subsidies gains nothing. Any plan that makes energy less abundant will significantly lower living standards. Global warming policies will not simply change U.S. citizens’ lifestyles — the policies will drastically change their standard of living.
Higher energy costs mean increased costs of housing, heating and air conditioning, lighting, transportation, food, and consumer products. Electricity costs would increase by over 50 percent, as outlined in a Department of Energy report.3 Household fuel prices would jump by 50 percent; the price of gasoline would rise by 60 cents per gallon, according to the economic consulting firms, Charles River Associates and DRI/McGraw-Hill.4
All consumers will bear the brunt of hasty action. Energy taxes and restrictions will affect people in every aspect of their lives:
· In their homes, which will be smaller and yet more expensive since fewer houses will be built. "Sealed" building standards will trap indoor air pollution and may increase respiratory problems such as asthma.
· The indoor temperature will be colder in the winter and hotter in the summer because of higher costs for fuels and electricity.
· On the dinner table, the cost of both fresh and prepared foods will rise.
· Families will cut back on recreational activities because of the high cost of gasoline and restrictions on "discretionary" activities that use fuel.
· Air travel, hit with special energy taxes, will rise in price and service will be cut back.
· Other services for family members — nursing homes, day care centers, hospitals — will be more expensive as those firms find their own energy costs skyrocketing.
· Police and fire departments, schools, and other municipal services will see their costs rise, which will lead to tax increases at the local level or cutting back on services.
· Families will be driving smaller, less comfortable cars and face restrictions on when they can drive. Most importantly, those much smaller cars will be much less safe. Controls such as rationing of gas will cause long lines and waiting times at gas stations reminiscent of the energy crises of the 1970s.
As shown earlier (Exhibit 1), people will feel the pinch of higher costs, fewer choices, more restrictions — at home, driving, eating, traveling, working, living.
The effects are likely to be reminiscent of the energy crisis of the 1970s, where the federal government instituted a system of government price controls, allowances, rationing, regulations, and other restrictions that caused gasoline shortages and long waiting lines; heating oil allocations; "nonessential" lighting extinguished in major cities; and official rationing plans imposed in many states. In many areas,
Exhibit 2: Some Proposals Offered by Federal Agencies to Reduce Greenhouse Gas Emissions From the U.S. Environmental Protection Agency, Internal Draft for Discussion, May 31, 1994
· Levy a 50 cents per gallon fee on gasoline · Introduce a new tax on the carbon content of fossil fuels · Install solar hot water heaters in Southern low-income homes · Use weatherization assistance funds to switch housing in the Northeast from primarily coal or oil to natural gas · Establish a national deposit on beverage containers · Phase in a national ban or surcharge on yard landfilling; use monies to help develop composting industry and markets for compost · Work with the roofing industry to eliminate or at least reduce the amount of dark materials produced; stimulate interest in light colored roofing. · Showcase emissions reductions programs in low-income housing · Encourage high-density living; require Fannie Mae to set lending guidelines so that home mortgage amounts would be higher if a home is located in a dense population area and close to public transit
Exhibit 3: Some Proposals Offered by Federal Agencies to Reduce Greenhouse Gas Emissions From the Department of Transportation’s "Car Talk" Policy Options, 1994-95
· Higher auto registration fees · "No-drive days" and "no-drive zones" for personal motor vehicles · Population/Immigration policies · School bus scheduling · Different portrayal in advertising of personal vehicle use · Zoning/land use controls · Vehicle retirement programs · Increase in fuel economy requirements · Motor fuels tax · Carbon tax
supplies of heating fuels were disrupted. President Nixon’s "energy czar," William E. Simon, described the results of some of these measures:
Even with a stack of sensible-sounding plans for even-handed allocation all over the country, the system kept falling apart, and chunks of the populace suddenly found themselves without gas. There was no logic to the pattern of failures. In Palm Beach suddenly there was no gas, while 10 miles away gas was plentiful. Parts of New Jersey suddenly went dry, while other parts of New Jersey were well supplied.5
While the 1970s can provide policymakers with examples of energy control systems that imposed enormous costs on consumers, some of the expected costs of global climate policies are not immediately obvious, especially those impacts that will be unfair, hurt the poor the the most, and even cost lives.
Some will feel the pain of climate change policies more than others; the policies will have inequitable impacts on individuals and families. Who gains and who loses will be outside of people’s control. People who live in large states and need to drive their automobiles longer distances would be harder hit by high gasoline taxes than those who live in northeastern cities (For the different patterns of energy consumption, see Exhibits 4 and 5). A study by Glenn R. Schleede for Consumer Alert’s National Consumer Coalition details the large gasoline price increases that would result in Texas. A fuel tax (or its proxy) of $.50 per gallon would mean a 43.5 percent increase in Texans’ cost of motor fuel; with a $1.00 per gallon fuel tax, Texans would face an 87 percent rise.6
People who live in areas dependent on coal use to produce electricity, for example, will find sharp increases in electricity bills. Nationally, coal supplied the energy to produce about 55 percent of all the electricity generated in the U.S. But
in Iowa, for example, coal supplied 85 percent of the energy used to generate electricity. Under a carbon tax of $100 per ton, or its regulatory equivalent, Iowans would see a 39.6 percent increase in electricity. With a $200 per ton carbon tax (which many economists consider the level needed now), that increase could skyrocket to 79.3 percent, according to an unpublished 1997 study by Schleede.
People who live in older, drafty homes and own older appliances would pay significantly more in energy costs than those in newer homes. Senior citizens on fixed incomes may not be able to afford steep increases in utility bills and may suffer severe health effects as they cut back on heating and air conditioning or try to spend less on food to help compensate for the higher costs.
The Clinton Administration has been reticent to release any economic assessments of emission reduction proposals, but what they have released is revealing. A draft Administration report circulated in July 1997 projected the effects on energy prices of a policy to reduce greenhouse gas emissions to their 1990 levels by 2010. Although such a proposal falls far short of what would be required to stabilize atmospheric concentrations of carbon dioxide, it would still have a significant impact on Americans. The price of gasoline would increase by 26 cents per gallon, natural gas by $1.49 per thousand cubic feet, coal by $52.52 per ton, and electricity by two cents per kilowatt-hour.7 In other words, home power costs would increase by nearly 25 percent, just to achieve the most modest of greenhouse gas emission reduction goals. (Residential electricity prices averaged 8.4 cents per kilowatt-hour in 1995.)
Climate change policies will also worsen the distribution of income in the U.S. because they fall most heavily on the poor. Carbon taxes or their proxies would cause relatively large income losses in the poorest one-fifth of the population, according to Dr. Gary Yohe, professor of economics at Wesleyan University. The poor also pay a larger share of their income for utilities, household fuels, gasoline and motor oil. In 1995, according to the Bureau of Labor Statistics, the poorest 20 percent of Americans paid almost $1,300 for these. If costs rise 50 percent as projected, they will have to pay nearly $24 more per month for their electricity bill; and $20 more per month for gasoline and motor oil for their car. They won’t be able to afford these increases without stiff cutbacks in essentials and will sink below a subsistence level (see Exhibit 6).
Costly Policies Can Be Lethal
Another major problem with climate change policies is that they will have a lethal effect on people. There would be an increased mortality risk as a result of global climate policies. Numerous studies have shown the relationship between income and health: Increased income means lower mortality; conversely, a loss in income can increase a person’s mortality risk. In sum, wealthier is healthier.8 As Ralph L. Keeney notes, this association is stronger for poor individuals.9 Under global climate policies, higher costs for energy translate into less income available for other purposes. For the poor, more of their income spent on energy for heating and cooling, for appliances and transportation, means less available for nutritious diets, medical checkups, and preventative health measures. Poor people would suffer a proportionally higher mortality risk because of higher energy costs.
Climate change policies will also kill more people through raising the federal Corporate Average Fuel Economy (CAFE) mandate for cars from 27.5 mph to 45 mph — a proposal pushed by several environmental groups. President Clinton recently one-upped this by promising to triple auto fuel efficiency over the next few years. But the human cost of CAFE is already high. CAFE causes manufacturers to downsize cars in size and weight to meet the federal standard for their fleets, and smaller cars are much less safe than large cars in crashes.
According to a 1989 Harvard-Brookings study by Crandall and Graham, the current CAFE standard causes nearly 2,000 to 4,000 additional traffic deaths per year.10 If the standard were raised to 40 mph, a 1992 study by Graham estimated that there would be an even greater increase in highway deaths — resulting in a total of 3,800 to 5,800 fatalities each year.11 Each day, from 10 to 16 people would die unnecessarily.
Causes for Concern
Americans should be concerned about these policies, not just because they are costly, but because they are wrong. The United States is a rich country, and we can afford to do many good things foolishly. But curtailing energy use, in and of itself, is not a "good thing." The human consequences of proposals to restrict energy use, especially on the most vulnerable people in America, are difficult to defend.
Finally, let me stress this point: Before U.S. negotiators agree to any binding targets and timetables to reduce energy use, we must inform the 90 percent of the American people of the facts. They deserve analysis, discussion, and public debate — for a clearer picture of the real risks of global warming policies. Instead, they are being fed scare stories — global warming is the cause of floods in North Dakota, hurricanes in Florida, tornadoes in Texas, malaria in Mexico, cholera in Peru, and so on. Yet such scares are not grounded in fact. Recent malarial outbreaks, for example, have more to do with restrictions on pesticide use than any other factor. Cholera outbreaks like those in Peru in 1991 can be linked more closely to cutbacks on chlorine for water treatment than to the weather.
While climate change proponents are painting these apocalyptic pictures, the true risks — the drastic consequences of the proposals on the American public — have been ignored. The risks of global warming are highly speculative; the risks of global warming policies are all too real. As the over 100 scientists who signed the Leipzig Declaration noted: "In a world in which poverty is the greatest social pollutant, any restriction on energy use that inhibits economic growth should be viewed with caution."
1 See, e.g., The Global Warming Debate, J. Emsley and R. Bate, eds. (London: European Science and Environment Forum, 1996).
2 See, e.g., Robert L. Bradley, Jr., "Renewable Energy: Not Cheap, Not ‘Green’," Cato Institute Policy Analysis No. 280, August 27, 1997.
3 Ronald J. Sutherland, "The Impact of Potential Climate Change Commitments on Energy Intensive Industries: A Delphi Analysis," February 5, 1997, pp. 4-5.
4 Lawrence M. Horwitz, The Impact of Carbon Dioxide Emission Reductions on Living Standards and Lifestyles, DRI/McGraw-Hill, September 1996; Paul M. Bernstein, W. David Montgomery, and Thomas F. Rutherford, World Economic Impacts Of U.S. Commitments To Medium Term Carbon Emissions Limits, Charles River Associates, January 1997.
5 Quoted in H.A. Merklein and William P. Murchison, Jr., Those Gasoline Lines and How They Got There (Dallas: Fisher Institute, 1980), p. 109.
6 Glenn R. Schleede, "Impact of Potential Greenhouse Gas Emissions on the People and Economy of Texas," National Consumer Coalition, September 1997.
7 "Raising Energy Prices Dramatically Would Harm Six U.S. Industries, DOE Finds," BNA Daily Environment Report, July 15, 1997, p. A-4.
8 See, for example, Frank B. Cross, "When Environmental Regulations Kill: The Role of Health/Health Analysis," Ecology Law Quarterly, Vol. 22, No. 4., 1995; John D. Graham, et al., "Poorer is Riskier," Risk Analysis, Vol. 12, No. 3, 1992; Aaron Wildavsky, Searching For Safety (New Brunswick: Transaction Publishers, 1988).
9 Ralph L. Keeney, "Risks Induced by Economic Expenditures," Risk Analysis, Vol. 10, No. 1, 1990.
10 Robert Crandall and John Graham, "The Effects of Fuel Economy on Auto Safety," Journal of Law and Economics, April 1989.
11 John Graham, "The Safety Risks of Proposed Fuel Economy Legislation," Risk — Issues in Health and Safety, Spring 1992.