Trading Places: Cap and Trade’s Likely Effect on the U.S. and China

From the diaries by Erick

The subject of the environment is a difficult one for conservatives. The Left has owned the discussion for years, always pitching the issue in the direst terms, decade after decade. When we have tried to point out reasonable objections to this extremist rhetoric, such as that there is less than a scientific consensus about climate change, we have been called “deniers” or worse.

This is doubly unfair because there are few things more conservative than conservation. There can be no doubt that being good stewards of our natural resources is necessary for human sustainability and survival. Unfortunately, in the public’s mind the Left has a monopoly on setting wise environmental policy. What we understand, as the Left seems unwilling to acknowledge, is that environmental and economic policies are often very closely associated. There are always tradeoffs for any change in policy.

Right now congressional Democrats, led by Henry Waxman and Ed Markey, are trying to use that conventional wisdom to pass a bill that could be destructive on both fronts. As even some on the left have pointed out, the bill may not actually establish binding caps on emissions, and may in fact actually contribute to worldwide pollution. This kind of up-is-down outcome is no surprise to those of us who understand how government is often less efficient at coming up with solutions than it is generating unintended consequences.

But then there is the looming economic impact of the bill, and there is no doubt it would be a negative one. Last month the Heritage Foundation produced a report analzying the bill in economic terms. According to the study, Waxman-markey would:

  • Reduce aggregate gross domestic product (GDP) by $7.4 trillion,
  • Destroy 844,000 jobs on average, with peak years seeing unemployment rise by over 1,900,000 jobs,
  • Raise electricity rates 90 percent after adjusting for inflation,
  • Raise inflation-adjusted gasoline prices by 74 percent,
  • Raise residential natural gas prices by 55 percent,
  • Raise an average family’s annual energy bill by $1,500, and
  • Increase inflation-adjusted federal debt by 29 percent, or $33,400 additional federal debt per person, again after adjusting for inflation.

There seems little question the bill, if it became law, would lead to an increase in prices for consumers. And that only begins with gas and oil prices, because of the price of gas and oil is built into the price of everything.

What’s more, everybody knows that the real source of carbon emissions in the near future is not the United States. Like Western Europe, our economy is developed already and we have the technologies to run cleaner factories and plants. Everybody knows the real source in coming decades will be China, India and Russia. In fact, just last year China surpassed us to become the country responsible for more CO2 than any other. This trend will continue.

And it does not take a masters in economics to realize that these countries are not about to follow our lead. The United States has a little bit less than one car per person (1.3 to be exact) while China is not even close. It has one car for every 100 people. Why would they make it more expensive for them to close the gap with us? They’re no fools. They won’t. That’s why President Obama and the Democrats in Congress would be just as foolish to make it more expensive for us to maintain and extend our lead.

Today we have the most dynamic market, but President Obama seems determined to sacrifice our competitive advantage for the sake of a campaign pledge to his base on the anti-business Left. Ironically, the most likely destination for the jobs would be none other than China and India.

Reducing carbon emissions can be a worthy goal, but it must be considered along with other objectives, especially the most important — ensuring that the United States remains the world’s strongest economy. The Waxman-Markey bill that President Obama is so eager to sign does not even come close to doing that.

Lastly, please forgive the plug but I am going to be on CNBC’s Squawk Box tomorrow (Wednesday) from 7-9 a.m. and I will be talking about this very subject. If you have stronger arguments to arm me with, I welcome your input, so please let me know in the comments.

Join the conversation as a VIP Member

Trending on RedState Video