Carney on climate rent seeking
In his now weekly DC Examiner Friday column, Tim Carney, CEI’s 2005-2006 Warren Brookes Journalism Fellow, looks at just who exactly stands to most benefit from a climate change mitigation bill currently in the Senate, co-sponsored by Sens. Joe Lieberman (D-Conn.) and John Warner (R-Va.):
“America’s Climate Security Act,” as the bill is dubbed, would require factories and power plants (among others) to spend greenhouse gas “allowances” if they emit CO2, methane or any other greenhouse gas.
Some allowances would be handed out by the government, and others would be auctioned off, with the proceeds going to fund renewable fuels or alternative energy. The sponsors say the cap on greenhouse gas emissions will ward off the worst effects of global warming.
For many companies, including Connecticut’s United Technologies, this bill would spell profits. It would pay them for things they’ve already done and increase demand for their products by increasing the costs of goods and energy.
Power plants, manufacturers and shippers would all see added costs, because they would have to pony up — either to government or to companies holding extra allowances — for the right to emit greenhouse gasses.
So is it just a happy coincidence for United Technologies that one of its home state senators is pursuing this? Doesn’t seem like it.
United Technologies Corporation’s PAC and employees have contributed nearly $250,000 to Lieberman’s campaigns since 1989, more than any other company, according to the Center for Responsive Politics. The company has also spent $6.5 million on lobbying in the last 18 months.
In letters to Congress, and presumably in their lobbyists’ visits to Capitol Hill, United Technologies has been advocating “a national climate change policy” featuring a cap-and-trade scheme, funding for alternative energy sources, and “recognition of voluntary early action.” That’s just what Lieberman sponsored.
Lieberman and Warner’s bill provides the “early-action credits” that will benefit UTC. By becoming more energy efficient in recent years, the company has saved money on energy costs, but has also earned the praise of environmental groups by reducing pollution and CO2 emissions. Now, thanks in part to their lobbying efforts, consumers and taxpayers might be paying them for what they’ve already done.
We’ve seen similar schemes like this before, of course, as in the case of Enron’s support of the Kyoto Protocol, which would have allowed it to live large trading emission credits, and in several energy companies’ support for the Climate Action Partnership (CAP). As CEI President Fred Smith noted in testimony on the CAP before the Senate Environment and Public Works Committee earlier this year:
[L]et us turn to the companies involved in the Climate Action Partnership, beginning with Duke Energy Corporation, which formed in May 2005 when Duke Energy merged with Cinergy. An October 2006 study by the Pew Center on Global Climate Change includes an eye-opening table on the per-ton cost of Cinergy’s various greenhouse gas emission reduction projects in 2004. [See page 5 of Fred’s testimony for the table.]
The table shows that 97 percent of Cinergy’s emission reductions came from efficiency improvements in its overwhelmingly coal-fired electric generating stations. Cinergy’s investment of $1.94 million in efficiency upgrades reduced the company’s carbon dioxide (CO2) emissions by 349,882 tons. This works out to a cost of $1.11 per ton of CO2 reduced. Suppose Cinergy were awarded early action credits for those reductions, Congress enacts Phase I of the McCain-Lieberman Climate Stewardship Act [which would have enacted a cap-and-trade scheme], and CO2-equivalent permits sell for $15 a ton in 2010 and $45 a ton in 2025, as estimated by the Energy Information Administration. In that case, Cinergy would reap a windfall profit of between 1263 percent and 3990 percent, for a much smaller cost incurred, that in many of their markets they have already passed along to consumers anyway.
Claims of companies “going green” should be met with a jaundiced eye and the always relevant question: Cui bono?