50 things wrong with Cap and Tax: A Garden of Piggish Delights

Waxman-Markey is part power-grab, part enviro-fantasy. Here are 50 reasons to stop it.

By Stephen Spruiell & Kevin Williamson

The stimulus bill was the legislative equivalent of the famous cantina scene from Star Wars, an eye-popping collection of the freakish and exotic, gathered for dubious purposes. The Waxman-Markey cap-and-trade bill, known as ACES (the American Clean Energy and Security Act), is more like the third panel in Hieronymus Bosch’s Garden of Earthly Delights — a hellscape that disturbs the sleep of anybody who contemplates it carefully.

Two main things to understand about Waxman-Markey: First, it will not reduce greenhouse-gas emissions, at least not at any point in the near future. The inclusion of carbon offsets, which can be manufactured out of thin air and political imagination, will eliminate most of the demands that the legislation puts on industry, though in doing so it will manage to drive up the prices consumers pay for every product that requires energy for its manufacture — which is to say, for everything. Second, it represents a worse abuse of the public trust and purse than the stimulus and the bailouts put together. Waxman-Markey creates a permanent new regime in which environmental romanticism and corporate welfare are mixed together to form political poison. From comic bureaucratic power grabs (check out the section of the bill on candelabras) to the creation of new welfare programs for Democratic constituencies to, above all, massive giveaways for every financial, industrial, and political lobby imaginable, this bill would permanently deform American politics and economic life.

The House of Representatives, famously, did not read this bill before passing it, which is testament to either Nancy Pelosi’s managerial incompetency or her political wile, or possibly both. If you take the time to read the legislation, you’ll discover four major themes: special-interest giveaways, regulatory mandates unrelated to climate change, fanciful technological programs worthy of The Jetsons, and assorted left-wing wish fulfillment. We cannot cover every swirl and brushstroke of this masterpiece of misgovernance, but here’s a breakdown of its 50 most outrageous features.

SPECIAL-INTEREST SOPS
1. The big doozy: Eighty-five percent of the carbon permits will not be sold at auction — they will be given away to utility companies, petroleum interests, refineries, and a coterie of politically connected businesses. If you’re wondering why Big Business supports cap-and-trade, that’s why. Free money for business, but higher energy prices for you.

2. The sale of carbon permits will enrich the Wall Street investment bankers whose money put Obama in the White House. Top of the list: Goldman Sachs, which is invested in carbon-offset development and carbon permissions. CNN reports:

Less than two weeks after the investment bank announced it would be laying off 10 percent of its staff, ***Goldman Sachs confirmed that it has taken a minority stake in Utah-based carbon offset project developer Blue Source LLC. . . . “Interest in the pre-compliance carbon market in the U.S. is growing rapidly,” said Leslie Biddle, Head of Commodity Sales at Goldman, “and we are excited to be able to offer our clients immediate access to a diverse selection of emission reductions to manage their carbon risk.”

3. With its rich menu of corporate subsidies and special set-asides for politically connected industries, Waxman-Markey has inspired a new corporate interest group, USCAP, the United States Climate Action Partnership — the group largely responsible for the fact that carbon permits are being given away like candy at Christmas rather than auctioned. And who is lined up to receive a piece of the massive wealth transfer that Waxman-Markey will mandate? Canada Free Press lists:

Alcoa, American International Group (AIG) which withdrew after accepting government bailout money, Boston Scientific Corporation, BP America Inc., Caterpillar Inc., Chrysler LLC (which continues to lobby with taxpayer dollars), ConocoPhillips, Deere & Company, The Dow Chemical Company, Duke Energy, DuPont, Environmental Defense, Exelon Corporation, Ford Motor Company, FPL Group, Inc., General Electric, General Motors Corp. (now owned by the Obama administration), Johnson & Johnson, Marsh, Inc., National Wildlife Federation, Natural Resources Defense Council, The Nature Conservancy, NRG Energy, Inc., Pepsico, Pew Center on Global Climate Change, PG&E Corporation, PNM Resources, Rio Tinto, Shell, Siemens Corporation, World Resources Institute, Xerox Corporation.

One major group of recipients of the free money being given to industry in the form of carbon permits are the electric utilities, represented in Washington by the Edison Electric Institute. Along with the coal and steel businesses, the utilities are positioned to receive a huge portion of the carbon permits — some of which will be disguised as measures for consumers — and have become one of the nation’s highest-spending lobbies, working to ensure that their interests are served by cap-and-trade.

4. To the extent that the allowances actually generate government revenue, that money is going to be used for fraud-inviting projects of dubious environmental or economic value. Example: Some allowance money will be used to “build capacity to reduce deforestation in developing countries experiencing deforestation, including preparing developing countries to participate in international markets for international offset credits for reduced emissions from deforestation.” What are the chances of that being abused?

5. In addition to the permits, the bill also allows for the creation of “offsets” — the medieval-style indulgences of the carbon-footprint world. In fact, nearly all of Waxman-Markey’s carbon-reduction targets can be met with offsets alone through 2050, meaning decades before any actual reduction of greenhouse gases is required. That means huge new expenses for small businesses and consumers in return for basically zero environmental improvement. And how does one earn an offset to sell? Get a farm and cash in through such methods as, and we quote, “improved manure management,” “reduced tillage/no-tillage,” or “afforestation of marginal farmlands.” Translation: Plant some trees around the house and claim some extra credits on the land the government may already be paying you not to farm. And do a better job of handling your B.S. — but you’ll never do as good a job on that one as the authors of Waxman-Markey.

6. Because the cap-and-trade regime will disadvantage domestic refineries vis-à-vis foreign competitors, such as India’s powerhouse Reliance Industries, Waxman-Markey is attempting to buy them off with free permits — 2 percent of the national total will go to domestic refineries, at no cost.

7. Agribusiness is exempted from cap-and-trade controls, but the farm lobby will be given permits to sell and to profit from anyway. All carrot, no stick — precisely what this powerful industry lobby is accustomed to receiving from Washington.

8. Waxman-Markey strips the EPA of its oversight role when it comes to managing the offsets associated with American farms. At the behest of Cargill and other big players in the farm lobby, oversight will be entrusted to the USDA — basically a wholly owned subsidiary of the agriculture cartel, one of America’s most rapacious special-interest groups, which already is stuffed with subsidies and sops.

9. Waxman-Markey directs the EPA to ignore the real environmental impact of ethanol and other biofuels. The gigantic subsidies lavished on the farm lobby through the ethanol program encourage farmers to clear forest land to plant corn — a net environmental loss that the use of ethanol does nothing to offset. An earlier version of the legislation that would have accounted for land-use changes was altered at the farm lobby’s demand. Now, the EPA will be forbidden to rain the same pain on the ethanol gang that it’s going to rain on the rest of the economy — a minimum of five years’ (ahem) “study” is required before a ruling on whether ethanol should be treated the same as any other fuel, and the EPA, USDA, and Congress all must agree to act before Big Corn reaps what Waxman-Markey sows.

10. Rural electrical cooperatives are demanding that the offsets be awarded in proportion to historic emissions, and they probably will prevail. This means that high-polluting generators, such as the coal-fired plants typical of electric co-ops’ members, will be rewarded because they pollute more, while cleaner producers, such as those using nuclear and hydroelectric power, will be penalized.

11. The farm lobby will be rewarded for practices that do little or nothing to reduce greenhouse gases. One such practice is “no till” planting, in which farmers forgo plowing and plant seeds directly into the soil. Two peer-reviewed scientific papers suggest that no-till either does nothing to decrease carbon dioxide or actually increases the level of greenhouse-gas emissions by upping emissions of nitrous oxide — a much more powerful greenhouse gas. Now it’s not clear that no-till will reduce greenhouse gases, but the practice does make weed-control more difficult, meaning that it supports the market for herbicides such as Monsanto’s RoundUp. Guess who’s spending millions lobbying for no-till?

12. Waxman-Markey provides an excuse for trade protectionism. The bill will give the Obama administration broad new powers to enact tariffs on imports from jurisdictions that have not had the poor sense to enact similar legislation, meaning that it invites both politically driven trade protectionism and retaliatory measures from abroad in the service of an empty green dream. As the New York Times puts it:

A House committee working on sweeping energy legislation seems determined to make sure that the United States will tax China and other carbon polluters, potentially disrupting an already-sensitive climate change debate in Congress. The Ways and Means Committee’s proposed bill language would virtually require that the president impose an import tariff on any country that fails to clamp down on greenhouse gas emissions. Directed primarily at China, the United States’ biggest manufacturing competitor, the provisions aim to protect cement, steel and other energy-intensive industries that expect to face higher costs under a federal emissions cap.

13. Waxman-Markey channels billions of dollars into subsidies for “international clean technology deployment for emerging markets.” David H. McCormick of the Treasury Department recently gave a speech on the establishment of an $8 billion fund for that purpose; those who showed up to gets the specs on this new gravy train included Sequoia Capital, the United Steelworkers Union, the Clinton Climate Initiative, Ernst & Young, Duke Energy, SunPower, Honeywell, Shell, ConocoPhillips, Credit Suisse, Chrysalix Energy Venture Capital, and Goldman Sachs. If you’re wondering who’s going to make real money off of Waxman-Markey, this list would be a pretty good place to start.

14. Naturally, Big Labor gets its piece of the pie, too. Projects receiving grants and financing under Waxman-Markey provisions will be required to implement Davis-Bacon union-wage rules, making it hard for non-union firms to compete — and ensuring that these “investments” pay out inflated union wages. And it’s not just the big research-and-development contracts, since Waxman-Markey forces union-wage rules all the way down to the plumbing-repair and light-bulb-changing level.

NON-CAP MANDATES
15. The renewable electricity standard is the big one here. This would require utilities to supply 20 percent of their power from renewable energy sources (or “increased efficiency”) by 2020. The Senate was unable to pass a smaller mandate in 2007, because favored sources of renewable energy (wind power, for instance) just don’t work in certain regions of the country, and regional blocs can wield a great deal of power in the Senate. These blocs may be less powerful this time around, because the Democrats within them will be under a great deal of pressure to pass this bill. The renewable standard would force utilities to rely increasingly on expensive sources of energy like wind and solar — expensive because they are capital-intensive and must be located far away from urban areas, necessitating long transmission lines. You can thank Congress for adding yet another charge to your monthly utility bill.

16. The bill would create a system of renewable electricity credits similar to the carbon offsets mentioned above — utilities that cannot meet the standard could purchase credits from other utilities. One way or another, however, the cost is getting passed along to you.

17. The renewable standard excludes sources of power like nuclear and coal gasification, and perhaps that’s to be understood. Even though these sources are cleaner than traditional coal-burning plants, they violate a number of green taboos. What’s less understandable is the way “qualified hydropower” is narrowly defined to exclude hydropower from Canada. Again, the thing to remember is that Congress is less concerned with greening the environment and more concerned with greening the pockets of parochial interests.

18. The legislation calls for the establishment of a Carbon Storage Research Corporation (CSRC) to steer $1 billion annually into the development of carbon-capture technologies. The CSRC would be funded via assessments on utility companies. Hear that? It’s the sound of another charge being added to your bill. Evidence suggests that subsidizing research into carbon-capture technology is either futile (in the case of traditional coal-powered plants) or unnecessary (the technology for sequestering emissions from gasification plants already exists).

19. The promotion of carbon capture will require a host of new regulations — the bill calls on the EPA to create a permitting process for geologic sequestration (burying captured carbon emissions in the ground), regulations to keep the buried carbon from escaping into the air, and regulations to keep it from escaping into the water supply. All we need now are carbon guards to throw the carbon in solitary confinement if it gets too rowdy in the prison yard.

20. The bill imposes performance standards on new coal-fired power plants to encourage the adoption of carbon-capture technology. Ratepayers would pay more for electricity because of the efficiency losses associated with carbon capture.

21. The bill regulates every light fixture under the sun. Actually, the sun might be the only light source that isn’t regulated specifically in this legislation. There are rules governing fluorescent lamps, incandescent lamps, intermediate base lamps, candelabra base lamps, outdoor luminaires, portable light fixtures — you get the idea. The government actually started down this road by regulating light bulbs in the 2005 energy bill. This bill merely tightens the regulations, which means the unintended consequences produced by the 2005 bill — more expensive light bulbs that burn out quicker — will probably get worse.

22. The bill extends its reach to cover appliances as well. Clothes washers and dishwashers, portable electric spas, showerheads, faucets, televisions — all these and more are covered specifically in the bill. You thought we were kidding when we said this bill represents the federal government’s attempt to expand its regulatory reach to cover everything. We weren’t.

23. Appliances will be required to come with “carbon output” labels, and retailers will get bonus payments for marketing those that are certified “best-in-class.” The bill sets up a payment schedule to reward the manufacturers of these “best-in-class” products: $75 for each dishwasher, $250 for each clothes washer, and so on. So go out and splurge on that new super-energy-efficient refrigerator — under this bill, you already made a $200 down payment.

24. The bill requires the EPA to establish environmental standards for residences, meaning a federally dictated one-size-fits-all policy for greening every home in America. When you’re retrofitting your home according to EPA guidelines, it will come as little comfort to know that the government is reimbursing you for your troubles, especially if you’re doing the work around April 15.

25. The bill would affect commercial properties, too. In fact, all buildings would be governed by a “national energy efficiency building code” that would require 50 percent reductions in energy use in all buildings by 2018, followed by 5 percent reductions in energy use every three years after that through 2030. No one disputes that these changes will be costly, but Waxman-Markey supporters argue that they will pay for themselves through lower energy bills. This argument holds up only if we assume that energy prices will stay flat or fall over time. But the aforementioned carbon caps instituted elsewhere in this legislation make that prospect highly unlikely. Businesses and homeowners will pay twice — once to retrofit their roosts and again when the energy bill arrives.

26. The bill instructs the EPA to regulate greenhouse-gas emissions from mobile sources such as cars, trucks, buses, dirt bikes, snowmobiles, boats, planes, and trains.

27. It instructs the EPA to cap and reduce greenhouse-gas emissions from non-mobile sources as well. These two items would be bigger news if the Supreme Court hadn’t already cleared the way for the EPA to regulate greenhouse-gas emissions. President Obama will probably move forward on this front even if Congress fails to pass the cap-and-trade bill. He has already announced a strict national fuel-efficiency standard for cars, and the implications for other sources of greenhouse-gas emissions are not good.

28. The bill calls on the EPA to establish a federal greenhouse-gas registry. Businesses would be required to collect and submit data on their emissions to the EPA, creating yet another compliance cost for them to pass on to their customers.

29. The bill undermines federalism by prohibiting states from creating their own cap-and-trade programs. Nearly half of all U.S. states have already taken some sort of action to cap greenhouse-gas emissions by forming regional compacts and implementing their own emission standards. Understandably, these states support a federal cap so that they are not at an economic disadvantage to states that do not cap emissions. If these states want to hamstring their own economies in the pursuit of green goals, that should be their business. States that don’t see any reason to do so should not be forced to share in their folly.

GREEN DREAMS
30. Utility companies are directed to start laying the groundwork for a glorious future in which everyone drives a plug-in car. The legislation directs them to start planning for the deployment of electrical charging stations along roadways, in parking garages, and at gas stations, as well as “such other elements as the State determines necessary to support plug-in electric drive vehicles.” (States are directed to consider whether the costs of planning or the implementation of these plans merit reimbursement. Either way, you wind up with the bill.)

31. The secretary of energy is required to establish a large-scale vehicle electrification program and to provide “such sums as may be necessary” for the manufacture of plug-in electric-drive vehicles, including another $25 billion for “advanced technology vehicle” loans. As if Detroit hadn’t gotten its hands on enough taxpayer money.

32. The bill directs the secretary of energy to promulgate regulations requiring that each automaker’s fleet be comprised of a minimum percentage of vehicles that run on ethanol or biodiesel.

33. It includes loan guarantees for the construction of ethanol pipelines. Nearly every energy bill in the last five years has included loan guarantees for the construction of ethanol pipelines. Apparently, would-be builders of this vital infrastructure are still having problems getting financing.

34. Congress passed (and Obama signed) a “cash for clunkers” program as part of the war appropriations bill this month. Under the program, you get a rebate for trading in a used car for one that gets slightly higher mileage. The Waxman-Markey bill takes this concept and applies it to appliances, electric motors — basically anything that can be traded in for a more energy-efficient version. These types of programs generally fail cost-benefit analyses spectacularly because more energy goes into the production of the new appliances than would have been used if the old ones had just run their course.

35. The bill includes $15 billion in grants and loans to encourage the manufacture of wind turbines, solar energy, biofuel production, and other sources of renewable energy that have benefited from decades of such largesse already. Another $15 billion is not going to make these energy sources cost-competitive. Only carbon rationing can achieve that. One suspects the Democrats know this; that’s why they are pushing a carbon-rationing bill. The $15 billion is just another sop to the green-energy lobby to help grease the skids.

36. The bill establishes within the EPA a SmartWay Transport Program, which would provide grants and loans to freight carriers that meet environmental goals.

37. The bill requires the secretary of energy to establish a program to make monetary awards to utilities that find innovative ways of using thermal energy, as if utilities needed an extra incentive to discover a new, cheap energy source.

38. It includes another $1.5 billion for the Hollings Manufacturing Partnership Program. This program pops up repeatedly in discussions of programs that both liberals and conservatives think should be eliminated. It is corporate welfare, pure and simple.

39. It includes $65 million for research into high-efficiency gas turbines, another gift to the corporate world with little environmental benefit.

40. It includes $7.5 million to establish a National Bioenergy Partnership to promote biofuels. Economic barriers to the commercial viability of biofuel as an energy source have proven to be so insurmountable that even with all of the federal mandates and subsidies already thrown their way, the ethanol companies lined up with everyone else for a federal bailout when the financial crisis hit. The last thing consumers need is another full-time, federally subsidized lobbying arm for that industry.

VARIOUS LEFT-WING WISH FULFILLMENT
41. One of Obama’s most reliable constituencies, college administrators, will be given billions of dollars to play with through the creation of eight “Clean Energy Innovation Centers,” university-based consortia charged with a mission to “leverage the expertise and resources of the university and private research communities, industry, venture capital, national laboratories, and other participants in energy innovation to support cross-disciplinary research and development in areas not being served by the private sector in order to develop and transfer innovative clean energy technologies into the marketplace.” Meaning that the famous business acumen of the federal government will be applied to the energy industry.

42. Another Obama constituency, the community-organizing gang — i.e., ACORN — will be eligible to receive billions in funding as the bill “authorizes the Secretary [of Energy] to make grants to community development organizations to provide financing to businesses and projects that improve energy efficiency.” Think federally subsidized consultants paid $55 an hour to tell businesses to turn down their AC in the summer.

43. Waxman-Markey also enables Obama to indulge his persistent desire to use the tax code to transfer wealth from people who pay taxes to people who don’t — i.e., from likely Republican voters to likely Obama voters. The bill “amends the Internal Revenue Code to allow certain low income taxpayers a refundable energy tax credit to compensate such taxpayers for reductions in their purchasing power, as identified and calculated by the Environmental Protection Agency (EPA), resulting from regulation of GHGs (greenhouse gases).”

44. Not only will Waxman-Markey slip more redistribution into the tax code, it will establish a new monthly welfare check. It will create an “Energy Refund Program” that will “give low-income households a monthly cash energy refund equal to the estimated loss in purchasing power resulting from this Act.”

45. Another new class of government dependents will be created by Waxman-Markey: Americans put out of work by Waxman-Markey. The bill establishes a program to distribute “climate change adjustment assistance to adversely affected workers.”

46. Waxman-Markey will create yet another raft of government dependents, but of a different sort — bureaucrats. The bill creates: a new United States Global Change Research Program, a National Climate Change Adaptation Program, a National Climate Service, Natural Resources Climate Change Adaptation Strategy office at the White House, and an International Climate Change Adaptation Program at the State Department.

47. And since everybody else is getting a check, Bambi gets one, too, in the form of money for “domestic wildlife and natural resource adaptation.”

48. States also get in on the action. The legislation allows each state to set up a State Energy and Environment Development (SEED) account into which the federal government can deposit emission allowances. States can then sell these allowances and use the proceeds to support clean-energy programs. They must set aside a certain amount of the money to fund federal mandates, but they are given broad discretion to use the rest by making loans, grants, and other forms of support available to favored constituencies. It’s federalism, of a sort — the wrong sort.

49. And, of course, everything includes a health-care component, even cap-and-trade. Waxman-Markey requires the Department of Health and Human Services to develop a “strategic action plan to assist health professionals in preparing for and responding to the impacts of climate change.”

50. Waxman-Markey dumps money into questionable “partnerships” and grants to study “emerging careers” in “renewable energy, energy efficiency, and climate change mitigation.” The first career to emerge, of course, will be managing grants to study emerging careers.

That’s our Top 50. We could go on. And on.

When Nancy Pelosi was advising congressmen to back this beast, she said they should not worry about the words of the bill they had not read, but think about four others: “jobs, jobs, jobs, jobs.” The legislation offers Pelosi perverse vindication: Waxman-Markey will create a lot of jobs for Wall Street sharps, Big Business rent-seekers, ACORN hucksters, utility-company lobbyists, grant-writers at left-wing organizations, college administrators, light-bulb-policing bureaucrats, and an army of parasitic hangers-on. It’s up to the Senate to stop it.