I am writing in response to the opinion piece, "Cap-and-trade needs scrutiny," published on Tuesday.
KARINA SCHOENGOLD | Posted: Sunday, July 12, 2009 12:00 am
I am writing in response to the opinion piece, "Cap-and-trade needs scrutiny," published on Tuesday. I am an economist with the University of Nebraska. I agree the proposed legislation is not perfect. In fact, much of the economic research finds that it would be more economically efficient to implement a carbon tax instead of a cap-and-trade program.
However, because of the lack of political acceptance of a carbon tax, legislators have chosen to rely on a cap-and-trade program. Given the title of the article, I was hoping the article would provide some substance in the analysis of the Waxman-Markey bill.
Despite the catchy title, the opinion piece entirely sidesteps the most important component of the bill - a cap-and-trade program for carbon emissions. The current version of the bill will result in most of the permits for carbon emissions being distributed to historical polluters, so there will be little immediate out-of-pocket expense for industry.
In addition, the limit on carbon emissions (the "cap") is slowly reduced over the next 40 years. The Congressional Budget Office estimates the annual per-household cost will be about $175 by 2020. This amount will not break the bank for most households. In addition, a look at the CBO report shows that this figure includes only the costs of the proposed legislation, and not the benefits. The potential benefits of the legislation are both political and economic.
The United States has the highest level of per-capita carbon emissions in the world.
Given that many other nations already are taking steps to reduce their emissions through international agreements like the Kyoto Protocol, showing the rest of the world that the United States is willing to take some action to reduce emissions will help relationships with the rest of the world.
Other benefits of reducing carbon emissions are economic. Studies have shown that with no action, there will be costs to the U.S. agricultural industry through lower output. Nebraska agriculture will have opportunities to earn revenue by selling carbon credits, a byproduct of using production practices such as no-till agriculture.
Other costs of inaction are difficult to measure but include increasing public health costs and a higher number of natural disasters.
The Journal Star editorial primarily discusses two components of the bill: new building codes and trade restrictions. Both of these are relatively minor portions of the bill. The estimated cost of $175 includes the cost of the new construction standards, as all of those standards are in place before 2020.
The technologies already exist to build to the new standards, and, in fact, many states already have local standards that are up to the new requirements. For the industry, it should be helpful to have a consistent standard for all states because building suppliers work throughout the nation.
The potential for trade restrictions is a concern. But without the trade restriction clause, opponent groups would be arguing that the new bill will make the United States "unable to compete" and that the bill will "result in all production moving to countries with no emission limits."
Since most of the developed nations in the world already are implementing carbon emission reduction policies in order to be compliant with the Kyoto Protocol and any future climate change agreement, it is unlikely there will be any trade problems with other developed nations. Developing countries may not reduce their emissions, but the unfortunate fact is that those nations already have lower production costs for many products.
In addition, new energy efficient technologies from countries such as the United States can help low-income nations raise their standard of living while limiting carbonemissions.
Karina Schoengold is an assistant professor with a joint appointment to the Department of Agricultural Economics and the School of Natural Resources at the University of Nebraska-Lincoln.