The cap and trade delusion

HT: Rich Karlgaard

The Waxman-Markey bill that was rammed through the House last Friday—so fast that no one had a chance to read the 300 pages that were added to the bill in the wee hours of the morning, much less to give the thing some healthy debate since it purports to do nothing less than drastically alter the way the U.S. economy uses energy while saving the planet—makes some heroic assumptions that really need exposing before the Senate takes up debate on cap and trade legislation later this summer.

The whole purpose of cap and trade is to raise the cost of hydrocarbon fuels so that a) we use less of them and more of other fuels, and b) thus reduce mankind's carbon footprint in the hopes of saving the world from destructive climate change. We all know that the U.S. economy depends heavily on oil for its transportation needs. We are less aware that electricity is absolutely critical to just about everything else that takes place in our modern economy.

As this chart (which uses wikipedia data) shows, about 70% of the electricity consumed in the U.S. comes from carbon-based fuels, and 19% comes from nuclear power plants. 10% comes from renewable energy sources, while the lion's share of that comes from hydroelectric dams. Nuclear power plants are not going to be increasing in number any time in the foreseeable future, even if Washington should suddenly turn nuke-friendly. Similarly, we're not going to be adding appreciably to the number of hydroelectric dams.

So most of the hopes of Waxman-Markey for the salvation of the planet rest on whether we can make really monumental changes in the mix of electricity generation: way less from hydrocarbon fuels and way more from renewable sources. If we want to cut hydrocarbon fuel consumption for electricity generation by, say 50%, we're going to have to increase renewable fuel use by a factor of more than 10 (i.e., from 3% to 35%). That's just not going to happen in one or even two lifetimes. And to even attempt it would be monumentally costly, since carbon-based fuels are much cheaper than renewable fuels.

Waxman-Markey also makes the huge mistake of neglecting the consequences of forcing the U.S. economy to use more expensive energy. As Peter Huber points out in his excellent essay "Bound to Burn," the poor countries of the world are the ones that control most of the world's carbon (e.g. petroleum, coal, and rain forests). Any attempt by us to limit our use of carbon-based fuels could be easily overwhelmed by poor countries' decision to use more. And as even Obama now realizes (thank goodness for small favors), we can't resort to tariff barriers to keep out cheap goods produced by countries that continue to use cheap carbon-based fuel.

Heroic attempts to push the U.S. economy in a direction that is going to be very difficult if not impossible to achieve, in the name of saving the planet based on climate models that have never proven their predictable power, are misguided to say the least, most likely extremely costly, and almost certainly ineffective in the end. Meanwhile, it is a given that they will be massively inefficient, while leading to widespread corruption and waste. Can someone please save the planet from the politicians?

UPDATE: Peter Ferrara has written an excellent article exposing the absurdities of the cap and trade legislation: Cap and Trade Dementia.