Waxman-Markey: An Exercise in Unreality

“Waxman-Markey … seeks a first in economic history: rationing without scarcity or price inflation. [It] allows generous ‘offsets’ so that carbon-based energy does not, in fact, become scarce. The bill does, however, contain a multitude of new regulations, product-efficiency mandates, and spending programs that will require extensive managerial attention from both the public and private sectors, though to much less effect than promised.”

– Steven F. Hayward and Kenneth P. Green, July 2009

The Waxman-Markey energy bill passed by the House of Representatives is a great illustration of how the government can take an idea that sounds good in theory – emission trading – and turn it into a nightmarish piece of legislation that is larded with pork; perverted by special-interest horse-trading; and will most likely be not only ineffective, but will produce perverse and negative consequences for both the economy and the environment.

As my colleague Steven Hayward and I point out in our most recent AEI Environment and Energy Outlook:

• The Waxman-Markey legislation will do for climate change what Sarbanes-Oxley did for financial regulation: establish a big new bureaucracy that imposes substantial costs on the economy.
• The legislation enumerates six hundred tasks the EPA must perform and gives other agencies significant administrative roles.
• The last time GHG emissions were at the Waxman-Markey target for 2050 was 1910.
• The liberal use of “offsets” in the bill suggests that even if Waxman-Markey works perfectly, fossil fuel emissions will be reduced by no more than 50 percent [versus 83 percent).
• Countries such as Grenada and Belize have per-capita emissions close to the Waxman-Markey 2050 levels.
• The legislation is a giveaway to the people environmentalists claim are destroying the planet.
• Waxman-Markey is unrealistic and will not fix the problem.

Unfortunately, the Senate is using Waxman-Markey as its launching point for crafting their own legislation. As Steve Hayward jokes, given that Waxman-Markey gives away 85% of the emission permits, and given that the Senate hasn’t started its own horse-trading and buy-offs yet, by the time this is all done, the government might give away 150% of the the available permits. But there is nothing funny about a 1,428-page bill that has been likened to an energy road to serfdom.

The devil is in the details, as it is often said. Waxman-Markey’s devil is monstrously big, and it begins qualitatively, not only quantitatively,  by setting up the machinery of control that would politicize energy for an open-ended future. Watering down a bad bill is not good enough.