Dunce cap

Speaker Nancy Pelosi seems set to deliver a vote on the “cap and trade” bill today.

Analysis of the bill has been notoriously murky, partly because the Reps voting on the bill haven’t actually read it.

This is a familiar pattern that should trouble everyone, regardless of where they stand politically. Congress repeatedly passing omnibus tax increases without reading the bills is bad news. It’s simply poor governance.

But hey, remember this one?

“Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

That’s still my favorite line from the campaign. The fact that he could say it with a straight face was just amazing.

But back to cap-and-trade. It’s nonsense. The mistake is in assuming that there’s actually some worthwhile point to reducing energy consumption; there isn’t. Reducing personal energy consumption can make sense if you’re trying to save money, but reducing global energy use? It’s just silly. We don’t want to reduce the amount of energy the world uses, we want to increase the amount of energy the world uses. In a very real sense, energy use is the fundamental definition of wealth. The more energy we use, the longer we live, the better our lives are, etc… etc….

So the issue isn’t energy consumption so much as fossil fuel consumption. But reducing consumption in the U.S. will do nothing to reduce global fossil fuel consumption.

Not a damn thing.

Why? Because fossil fuels are commodities. A reduction in demand in location A just means that there’s more available for location B. Reduce demand in New York and more oil gets used in the China. The energy market is a global market and local variations have little effect on aggregate demand. If we reduce our consumption all we do is lower the cost of fossil fuels in China, India, and Russia.

And from a strict conservation standpoint, shifting consumption from New York to China would result in more pollution, significantly more waste, and far more carbon emissions. First-world industry is remarkably efficient and clean–we extract as much energy out of each barrel of oil as we possibly can (and we keep getting more and more efficient). But all that efficiency is expensive and time-consuming; third world economies just can’t match that level of efficiency. Shifting demand from New York to China is a loss in terms of efficiency, conservation, and carbon.

So Congress will pass a meaningless, massive tax hike–a tax hike that will fall disproportionately on the poor by the way–without reading the bill. The bill will radically reduce American economic efficiency, cost trillions of dollars, and increase the amount of carbon in the global atmosphere. Way to go.

Update: Lest I be accused of just wanting us to stick our heads in the sand….

Let’s assume for a moment that carbon emissions are the most proximate cause of global atmospheric warming and that such warming would have catastrophic consequences for humanity. (I’m open to persuasion on the first and  increasingly doubtful of the second claim, but we’ll leave those issues aside for the moment and accept the dire warnings.)

Reducing carbon emissions globally is extremely difficult, not just as a matter of politics, but as a matter of enforcement. The simple fact is that the countries and factories most likely to avoid, resist, or cheat the system are those countries and factories that are the least efficient and the most responsible for gross carbon emissions. Further, reducing domestic energy consumption only lowers costs for foreign industry, which again, is far more likely to be less efficient and less clean.

The problem of pollution is, as most things are, a problem of poverty. Cleaning the waste of production requires capital investment, investment that is difficult for poor populations to afford. The best way to combat the effects of inefficient industry is to help increase their efficiency. In global terms, that means doing what we can to increase global wealth. That means increased trade, the elimination of trade barriers, including import quotas, tariffs and excise taxes. It means opening borders to allow increased immigration and emigration. It means working to improve basic sanitation and irrigation in the poorest countries, reducing civil strife and putting an end to racial and ethnic cleansing, and supporting human rights across the globe. It means reducing the wasteful kickbacks and obscene political appropriations that dominate most modern democracies, and it means ending the absurd tax laws that limit the flow of global capital.

In other words, good governance would do more in the long run to limit carbon emissions than anything. But good governance generally offers few opportunities for graft. The cap-and-trade bill, on the other hand… that’s graft-a-palooza.

Update: Over at Volokh, Jim Lindgren weighs in on the cap-and-trade bill.

The cap-and-trade bill, if passed by the Senate and actually implemented over the next few decades, would do more damage to the country than any economic legislation passed in at least 100 years. It would eventually send most American manufacturing jobs overseas, reduce American competitiveness, and make Americans much poorer than they would have been without it.

The cap-and-trade bill will have little, if any, positive effect on the environment — in part because the countries that would take jobs from US industries tend to be bigger polluters. By making the US — and the world — poorer, it would probably reduce the world’s ability to develop technologies that might solve its environmental problems in the future.

Update: From IBD:

The House of Representatives is preparing to vote on an anti-stimulus package that in the name of saving the earth will destroy the American economy. Smoot-Hawley will seem like a speed bump.

cost of cap and trade