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Research & Commentary: Pointless Greenhouse Gas Reductions Bill Would Crush Low-Income Colorado Families

April 12, 2019

Since 1970 Airborne Pollutants Have Declined 73 Percent While GDP Has Increased 262 Percent

Legislation in the Colorado House of Representatives would establish a mandatory goal of reducing by 2025 greenhouse gas (GHG) emissions from retail electricity sales in the state by 26 percent below its 2005 levels. The Centennial State would then have to decrease emissions by 50 percent below 2005 levels by 2030, and 90 percent below 2005 levels by 2050.

The purpose of the bill is to “require the use of all available practical methods which are technologically feasible and economically reasonable so as to reduce, prevent, and control air pollution throughout the state of Colorado.” The State Air Quality Control Commission will do so by implementing an open-ended Clean Energy Plan. However, this will most likely mean involving the state in a cap-and-trade scheme or carbon dioxide tax program or expanding the state’s renewable energy mandate, the Renewable Energy Standard. Possibly, it could mean executing all three.

Establishing any of these regressive programs would be a costly mistake that would disproportionally harm low-income Coloradans and have minimal effects on air quality.

Cap-and-Trade

Cap-and-trade programs limit carbon dioxide emissions by establishing a specific amount of carbon dioxide businesses or other organizations may produce and allowing additional capacity to be bought from other organizations that have not used their full production allowance. If an entity emits above the cap without purchasing additional allowances, the state would inflict a financial penalty.

Advocates of cap-and-trade schemes point to California and the nine northeastern states that make up the Regional Greenhouse Gas Initiative (RGGI) as examples of how these programs can be successfully implemented. In reality, cap-and-trade programs do little to reduce carbon dioxide emissions, but they do make virtually everything more expensive for everyone, burdening low-income families the most.

A Manhattan Institute study estimates the California cap-and-trade program raised residential electricity costs by as much as $540 million in 2013. California’s Legislative Analyst’s Office (LAO) estimates cap-and-trade will increase gasoline prices by 15–63 cents per gallon by 2021 and by 24–73 cents per gallon by 2031. LAO projects Californians will be spending $2 billion to $8 billion extra on gasoline by 2021.

LAO also estimates the increased gasoline prices will cost $150–$550 per household by 2026. Retail electricity prices in the Golden State are 53 percent higher than the national average. Prior to the enaction of its cap-and-trade program, California’s prices were only 40 percent higher. According to the U.S. Energy Information Administration (EIA), retail electricity prices in the 10 RGGI states and California are currently 40 percent higher than the U.S. average.

In a Cato Journal article released in 2018, David T. Stevenson of Delaware’s Caesar Rodney Institute writes there are “no added reductions in carbon dioxide emissions, or associated health benefits, from the RGGI program. RGGI emission reductions are consistent with national trend changes caused by new EPA power plant regulations and lower natural gas prices. The comparison requires adjusting for increases in the amount of power imported by the RGGI states, reduced economic growth in RGGI states, and loss of energy intensive industries in the RGGI states from high electric rates.”

Carbon Dioxide Taxes

The purpose of the carbon tax is to decrease carbon dioxide emissions by levying a tax based on the amount of emissions produced. The Congressional Budget Office (CBO) found a $28 per ton carbon dioxide tax would result in energy costs being 250 percent higher for the poorest one-fifth of households than the richest one-fifth of households.

CBO reports the reason for cost discrepancy is “a carbon tax would increase the prices of fossil fuels in direct proportion to their carbon content. Higher fuel prices, in turn, would raise production costs and ultimately drive up prices for goods and services throughout the economy … Low-income households spend a larger share of their income on goods and services whose prices would increase the most, such as electricity and transportation.”

2013 analysis from the National Association of Manufacturers estimates a $20-per-ton carbon dioxide tax in Colorado would result in a 40 percent increase in the price of natural gas. The report also estimated gasoline prices would be more than 20 cents per gallon higher and there would be an 8.4 percent increase in household utility rates in the first year alone. In July 2012, Australia established a nationwide carbon dioxide tax set at $23 (Australian dollars) per ton and repealed it just two years later, after it produced the highest quarterly increase in household electricity prices in the country’s history.

One other substantial problem with the carbon dioxide tax is that it would produce an insignificant environmental benefit, as Oren Cass, senior fellow at the Manhattan Institute, noted in National Affairs. “The effectiveness of a carbon tax as a matter of environmental policy [depends] not only on how it would directly alter the trajectory of [local] emissions but also on its ability to affect global emissions by driving globally applicable technological innovation or by influencing the behavior of foreign governments,” wrote Cass. “On each of these dimensions, the carbon tax fails.”

Renewable Energy Mandates

Renewable energy mandates such as the Renewable Energy Standard force expensive, heavily subsidized, and politically favored electricity sources such as wind and solar on ratepayers and taxpayers while providing few, if any, net environmental benefits.

Unsurprisingly, in states with REMs, energy rates are rising twice as fast as the national average and states with renewable mandates had electricity prices 26 percent higher than those without. The 29 states with renewable energy mandates (plus the District of Columbia) had average retail electricity prices of 11.93 cents per kilowatt hour (cents/kWh), according to the U.S. Energy Information Administration. On the other hand, the 21 states without renewable mandates had average retail electricity prices of just 9.38 cents/kWh.

A study by the left-leaning Brookings Institution found replacing conventional power with wind power raises electricity prices 50 percent and replacing conventional power with solar power triples electricity costs.

In just 12 states, the total net cost of the renewable mandates was $5.76 billion in 2016 and will rise to $8.8 billion in 2030, a 2016 study revealed. The same study found Colorado’s Renewable Energy Standard cost state taxpayers and ratepayers more than $523 million in 2016 and increased electricity prices by 5 percent. It also found losses in economic activity in 2016 due to the mandate totaled more than $1.6 billion, and it cost the state more than 10,000 jobs. The study estimates electricity costs will rise to $729 million by 2020, with electricity prices increasing by 11.2 percent. It also estimated economic activity in 2020 will be reduced by more than $2.15 billion and $13,600 jobs will be eliminated.

“Since the environmental benefits of greenhouse gas emissions in Colorado are likely to be very small in relation to global carbon dioxide emissions and are only partially realized by Colorado residents,” the study concludes, “the losses in value added and employment suggest that [renewable energy mandate] policies would likely involve a decrease in net economic welfare in Colorado.”

Attempting to expand the Renewable Energy Standard to meet these GHG emissions goals would also likely be impossible. The American Action Forum estimates the costs of moving the entire country to 100 percent renewable sources would be around $5.7 trillion, and a 2019 Policy Brief from the Institute for Energy Research (IER) argues moving to 100 percent renewables is “nothing more than a myth.”

According to IER, “Batteries of the size and scope needed [to back up] 100-percent renewables are unproven and not cost effective. Even if a 100 percent renewable future were feasible, the land requirements and costs of transitioning would be enormous.”

GHG Emissions Already Steadily Declining

A Texas Public Policy Foundation report notes that in the United States from 1970 to 2017, “the aggregate emissions of the six criteria pollutants identified in the Clean Air Act have declined by 73 percent. This improvement has occurred alongside a 262 percent increase in Gross Domestic Product (GDP), a 189 percent increase in vehicle miles traveled, and rising population and energy consumption. These achievements should be celebrated as a public policy success story, but instead the prevailing narrative among political and environmental leaders is one of environmental decline that can only be reversed with a more stringent regulatory approach.”

The report further stresses, “In contrast to this doomsday narrative, consider the data. Since 1990, the ambient concentrations of these six pollutants—measures of what we inhale with each breath—have decreased by an average of 64 percent. Ambient concentrations of lead, sulfur dioxide, and carbon monoxide have declined by 98 percent, 88 percent, and 77 percent, respectively, since 1990. Airborne emissions of mercury and mercury compounds in the U.S. have declined by 74 percent since 2000. Ambient concentrations of benzene, a well-known carcinogen and the most widespread hazardous pollutant, declined by more than 66 percent from 1994 to 2013.

“What made these achievements possible were advances in emissions control technologies and the economic prosperity that enabled the widespread implementation of those technologies, as well as the means to monitor their effect on air quality,” the report concludes.

Just to highlight a few examples, the Environmental Protection Agency (EPA) notes coal-fired power plants equipped with advanced emission control technologies saw an 82 percent decrease in nitrogen oxide (NOx) emissions between 1995 and 2017, while sulfur dioxide (SO2) emissions were down 89 percent over that same period. From 2006 to 2016, EIA reported natural gas use increased by 26 percent, while over that same period EPA noted nitrogen dioxide (NO2) emissions decreased by 21 percent and SO2 emissions decreased by 66 percent. EPA’s latest “Greenhouse Gas Inventory” notes methane (CH4) emissions from natural gas and petroleum systems decreased by 14 percent from 1990 to 2016, even as production in these two industries increased by 50 percent and 21 percent, respectively.

According to EPA, carbon dioxide emissions in Colorado from fossil fuel consumption peaked at 98.14 million metric tons in 2007. Since 2010, while crude oil production in the state quadrupled and natural gas production increased by more than 15 percent, carbon dioxide emissions have decreased by 7 percent to 88.53 million metric tons.

“Fossil fuels further improve human health by making environmental protection both valued and financially possible, and by powering technologies that protect human health and extend lives,” note The Heartland Institute’s Joseph Bast and Peter Ferrara, in a study on “The Social Benefits of Fossil Fuels.

Air quality in Colorado and the rest of the United States has reached a point where new regulations or tighter standards are no longer necessary. Rather than wasting billions of taxpayer dollars chasing away the last remaining molecules of a possible pollutant, lawmakers should refrain from passing new legislation and allow air quality to improve even further as technological advancements develop.

Policymakers should not force Coloradans to switch from fossil fuels to higher-cost, intermittent “renewable” electricity sources, such as wind or solar. The higher energy costs guaranteed by this switch would lead to slower economic growth, as affordable energy is the key to productivity growth and the production of virtually all goods and services. Therefore, elected officials and agency regulators at all levels of government should repeal subsidies, taxes, and regulations that jeopardize the use of fossil fuels.

The following documents provide more information about carbon dioxide taxes, cap-and-trade schemes, renewable energy mandates, and the benefits of fossil fuels.

The U.S. Leads the World in Clean Air: The Case for Environmental Optimism
https://files.texaspolicy.com/uploads/2018/11/27165514/2018-11-RR-US-Leads-the-World-in-Clean-Air-ACEE-White.pdf
This paper from the Texas Public Policy Foundation examines how the United States achieved robust economic growth while dramatically reducing emissions of air pollutants. The paper states that these achievements should be celebrated as a public policy success story, but instead the prevailing narrative among political and environmental leaders is one of environmental decline that can only be reversed with a more stringent regulatory approach. The paper urges for the data to be considered and applied to the narrative.

The 100 Percent Renewable Energy Myth
https://www.instituteforenergyresearch.org/wp-content/uploads/2019/02/Renewable-Myth-Policy-Brief219.pdf
This Policy Brief from the Institute for Energy Research argues that a countrywide 100 percent renewable plan would put the U.S. economy in jeopardy. The brief investigates the intermittency, land requirements, capacity factors, and cost of transition and construction materials that limit the ability of the U.S. to adapt to 100 percent renewable energy.

Legislating Energy Poverty: A Case Study of How California’s and New York’s Climate Change Policies Are Increasing Energy Costs and Hurting the Economy
https://www.pacificresearch.org/wp-content/uploads/2018/12/LegislatingEnergy_F_Web.pdf
This analysis from Wayne Winegarden of the Pacific Research Institute shows the big government approach to fighting climate change taken by California and New York hits working class and minority communities the hardest. The paper reviews the impact of global warming policies adopted in California and New York, such as unrealistic renewable energy goals, strict low carbon fuel standards, and costly subsidies for buying higher-priced electric cars and installing solar panels. The report’s authors found that collectively these expensive and burdensome policies are dramatically increasing the energy burdens of their respective state residents.

Evaluating the Costs and Benefits of Renewable Portfolio Standards
https://www.heartland.org/publications-resources/publications/evaluating-the-costs-and-benefits-of-renewable-portfolio-standards?source=policybot
This paper by Timothy J. Considine, a distinguished professor of energy economics at the School of Energy Resources and the Department of Economics and Finance at the University of Wyoming, examines the renewable portfolio standards (RPS) of 12 different states and concludes while RPS investments stimulate economic activity, the negative economic impacts associated with higher electricity prices offset the claimed economic advantages of these RPS investments.

The Carbon Tax: Analysis of Six Potential Scenarios
https://www.instituteforenergyresearch.org/wp-content/uploads/2018/10/The-Carbon-Tax-Analysis-of-Six-Potential-Scenarios_Final.pdf
This study commissioned by the Institute for Energy Research and conducted by Capital Alpha Partners uses standard scoring conventions to evaluate and model the economic impacts of carbon taxes set at a variety of dollar figures, with different phase-in durations, and with an array of revenue-recycling strategies. It finds a carbon dioxide tax will not be pro-growth, is not an efficient revenue raiser for tax reform, depresses GDP and introduces with long-term fiscal challenges playing particular stress on the states, and is inconsistent with meeting the long-term Paris Agreement emissions reduction goals.

The Carbon Tax Shell Game
https://www.heartland.org/publications-resources/publications/the-carbon-tax-shell-game
Oren Cass of the Manhattan Institute argues the carbon dioxide tax is a shell game. The range of designs, prices, rationales, and claimed benefits varies so widely that assessing the validity of most proposals is nearly impossible to accomplish. In this article for National Affairs, Cass says the effect of carbon dioxide taxes on emissions has proven to be insubstantial, a fact he says is ignored by the tax’s proponents when promoting its purported benefits.

The Case Against a U.S. Carbon Tax
https://www.heartland.org/publications-resources/publications/the-case-against-a-us-carbon-tax
In this paper from the Cato Institute, Robert P. Murphy, Patrick J. Michaels, and Paul C. Knappenberger examine carbon dioxide tax programs in place in Australia and British Columbia and consider whether similar programs would be successful in the United States. They conclude, “In theory and in practice, economic analysis shows that the case for a U.S. carbon tax is weaker than its most vocal supporters have led the public to believe.” 

Economic Outcomes of a U.S. Carbon Tax
https://www.heartland.org/publications-resources/publications/economic-outcomes-of-a--us-carbon-tax
This report from the National Association of Manufacturers evaluates the potential impacts carbon dioxide taxes whose revenues would be devoted to a combination of debt and tax rate reduction would have on the U.S. economy. The results consider the varied economic effects of fossil-fuel cost increases caused by carbon taxes, as well as the positive economic effects of the assumption that carbon dioxide tax revenues would be used to reduce government debt and federal taxes.

The Social Benefits of Fossil Fuels
https://www.heartland.org/publications-resources/publications/the-social-benefits-of-fossil-fuels
This Heartland Policy Brief by Joseph Bast and Peter Ferrara documents the many benefits from the historic and still ongoing use of fossil fuels. Fossil fuels are lifting billions of people out of poverty, reducing all the negative effects of poverty on human health, and vastly improving human well-being and safety by powering labor-saving and life-protecting technologies, such as air conditioning, modern medicine, and cars and trucks. They are dramatically increasing the quantity of food humans produce and improving the reliability of the food supply, directly benefiting human health. Further, fossil fuel emissions are possibly contributing to a “Greening of the Earth,” benefiting all the plants and wildlife on the planet.

Climate Change Reconsidered II: Fossil Fuels – Summary for Policymakers
https://www.heartland.org/publications-resources/publications/climate-change-reconsidered-ii-fossil-fuels---summary-for-policymakers
In this fifth volume of the Climate Change Reconsidered series, 117 scientists, economists, and other experts assess the costs and benefits of the use of fossil fuels by reviewing scientific and economic literature on organic chemistry, climate science, public health, economic history, human security, and theoretical studies based on integrated assessment models and cost-benefit analysis.

Less Carbon, Higher Prices: How California’s Climate Policies Affect Lower-Income Residents
https://www.heartland.org/publications-resources/publications/less-carbon-higher-prices-how-californias-climate-policies-affect-lower-income-residents
This study from Jonathan Lesser of the Manhattan Institute argues California’s clean power regulations, including the state’s renewable power mandate, is a regressive tax that harms impoverished Californians more than any other group. 

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Environment & Climate News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Lennie Jarratt, a state government relations manager at The Heartland Institute, at ljarratt@heartland.org or 312/377-4000.