Events before and after the election have only confirmed that President Bush was indeed right to put tax relief at the center of his domestic agenda. With the nation’s economy slouching towards recession, with the lights going out in California and with consumers squeezed by soaring energy prices, Mr. Bush is right to advocate tax cuts and federal initiatives to “speed construction of new energy sources.” But why, then, is Mr. Bush also advocating new taxes on electricity production?
OK, so it’s not exactly an energy tax Mr. Bush is proposing, but the regulatory equivalent thereof — a virtual carbon tax in the form of “mandatory” limits on carbon dioxide (CO2) emissions from power plants. CO2 is an inescapable byproduct of the combustion of fossil fuels like coal, oil, and natural gas, which provide 70 percent of America’s electricity supply. There is no way to restrict CO2 emissions without making electricity less available and more expensive — exactly the opposite of what is needed in today’s precarious economic climate.
Mr. Bush and his Environmental Protection Agency administrator, Christine Todd Whitman, propose to regulate CO2 as part of a “multi-pollutant” strategy. In principle, “multi-pollutant” or “integrated” air quality management is a good idea. The uncertainties created by ad hoc, uncoordinated, pollutant-by-pollutant regulations discourage power producers from making long-term investments in new capacity and new technologies, shortchanging both consumers and the environment.
But, there is a huge practical difference between coordinating controls on regulated pollutants like sulfur dioxide (SO2), nitrogen oxide (NOx) and mercury, which damage air quality or threaten human health, and expanding federal regulation to encompass CO2, which has zero impact on air quality and is non-toxic at 20 times current concentrations.
Regulating CO2 is a bad idea for several reasons — scientific, economic and legal.
To begin with, CO2 is simply not in the same category as SO2, NOx or mercury. Whatever one may believe about the theory of manmade global warming, CO2 is not an “ambient” air pollutant. It does not foul the air, contribute to asthma or bio-accumulate as a toxin in fish. Indeed, CO2 is plant food, and rising concentrations enhance the growth of most trees, crops and other flora — an environmental benefit. What this means is that science offers no clue how to coordinate CO2 controls with regulatory requirements for truly noxious substances like SO2, NOx and mercury. The resulting program would be an arbitrary hodge-podge, not an “integrated” strategy.
More importantly, regulating CO2 conflicts with Mr. Bush’s goal of increasing America’s energy supplies. Basic economics tells us that if you tax a thing, you will get less of it. CO2 controls would function as a carbon tax on electricity produced from fossil fuels. The result, according to the U.S. Energy Information Administration, would be less electric supply capacity, higher natural gas prices and higher electricity prices.
Worse, federal agencies armed with the power to regulate CO2 could wreak havoc on the U.S. economy. The carbon in fossil fuels is not an impurity that can somehow be scrubbed out but the very thing that makes them fuels. It is by oxidizing carbon (to form CO2) that the energy in fossil fuels is released. Therefore, once government starts regulating fuels based on their carbon content, or activities based on their CO2 emissions, there is no logical stopping point short of total suppression. Advocates of the U.N. global warming treaty, the Kyoto Protocol, understand this logic very well. They seek to restrict and, ultimately, eliminate the use of fossil fuels, and they see CO2 regulation as the indispensable means to that end. Mr. Bush rejects their goal, yet he would give government the means to pursue it.
Mr. Bush criticizes the Kyoto Protocol for exempting developing countries from the kinds of energy constraints it would impose on industrial nations like the United States. As the leading industry and labor critics of Kyoto put it, “a global problem demands a global solution.” Acting on this sentiment, the U.S. Senate preemptively rejected the Kyoto Protocol in July 1997, when it approved the Byrd-Hagel resolution by a vote of 95 to zero. Yet a “multi-pollutant” strategy would impose Kyoto-like restrictions on the U.S. alone, exempting every country on earth except the U.S. In effect, Mr. Bush argues that, “a global problem demands a unilateral solution.” That should really go over big with the AFL-CIO!
Finally, a “multi-pollutant” approach would eviscerate the “Knollenberg” funding limitation, which bars federal agencies from implementing the Kyoto treaty until and unless it is ratified. The Kyoto Protocol is above all else a CO2 regulation treaty, and the U.S. could not implement it without capping CO2 emissions from power plants. Thus, if enacted, Mr. Bush’s proposal would establish a massive Kyoto-friendly legal precedent. From that time forward, Congress would be utterly unable to identify, much less block, any federal regulation as an illicit attempt to implement a non-ratified treaty.
Industry and labor opponents of the Kyoto Protocol need to wake up. Few seem to realize that CO2 regulation would effectively overturn both the Byrd-Hagel resolution and the Knollenberg funding limitation. If they do not want to see Kyoto implemented bit by bit, through creeping regulation, they must categorically reject Mr. Bush’s proposal.
U.S. energy policy now stands at a crossroads, and the time has come for Mr. Bush to make a choice. He can either pursue a Kyoto agenda of carbon taxes and energy suppression, or he can pursue a prosperity agenda of tax relief and energy abundance. Mr. Bush would be well advised to champion free market energy policies and leave the Kyoto agenda to the dustbin of history.