POWER May 2013 - 6

SPEAKING OF POWER
Bait and Switch
T
he Boxer-Sanders " Climate Protection
Act " and its sister bill, the " Sustainable
Energy Act " are the latest, and perhaps
the most onerous, in a series of legislative
proposals that seek to tap the immense revenue
stream promised by taxing carbon.
Sen. Barbara Boxer (D-Calif.), chair of the
Environment and Public Works Committee,
recently signed on as a co-sponsor of Sen.
Bernie Sanders' (I-Vt.) " fee and dividend "
carbon tax legislative proposal. The law
would impose a " fee " on carbon emissions
at their source and rebate a " dividend " to
" legal residents of the U.S. " for a portion of
the cost impact of the tax, along with other
incentives. The legislation carefully substitutes
the more benign " fee " in place of the
more pejorative " tax, " which it is. The government
will also slice off a healthy portion
of the carbon tax revenue for its own use.
The legislative proposals enable collection
of the tax beginning at $20 per ton
of carbon or methane equivalent emissions,
rising at a rate of 5.6% a year for 10 years
(effectively a 72.4% compounded increase).
The tax would be extracted at the point
of sale as well as from fossil fuel importers.
Sanders estimates his carbon tax plan
would generate about $1.2 trillion in new
government revenue over the first 10 years
covered by the legislation, although the
legislation is written with a much longer
effective period in mind, through 2050.
The legislation also directs the government
how to spend its newly collected
bounty. A portion of the proceeds will
be used for infrastructure improvements,
about 60% would be distributed to residents
in the form of rebates and other efficiency
projects, and the balance, about
25% of the revenue, will go to the federal
government for deficit reduction, which
is a meaningless gesture unless matching
expenditures are simultaneously curbed.
The scheme has a little something for almost
everyone, no doubt intended to attract
the necessary votes for passage.
The Rest of the Story
The sales pitch obviously self-identifies as
the old bait-and-switch scheme. The " bait "
for legislators is each gets to " bring home
the bacon " in the form of rebate checks to
6
voters and huge new tax revenues for the
federal government. For carbon control proponents,
the bait is found in the Sanders/
Boxer Climate Legislation summary: " setting
a long-term emission reduction goal of 80
percent or more by 2050 as science calls
for. " For the rest of us, we are being asked
to defer to the " experts " and believe that
anthropogenic emissions cause an increase
in global average ambient temperatures, an
assumption that current facts don't support
(see " Where's the Warming? " February 2013).
ton carbon tax rate plus a projection of
the large increase in the carbon tax rate
necessary to achieve the 80% reduction
by 2050 goal and prepared its analysis in
the report " Economic Outcomes of a U.S.
Carbon Tax. " NERA concludes that a " carbon
tax would have a devastating impact "
on the economy due to higher prices for
natural gas and electricity and other energy
commodities causing " output in energy intensive
industries [to] drop by as much as
15 percent and 7.7 percent in non-energy
[The carbon tax] sales pitch obviously selfidentifies
as the old bait-and-switch scheme.
This statement is a standard rhetorical device
known as an argument from authority,
certainly not the foundation upon which to
build a multi-trillion-dollar tax structure.
The " switch " part of the scheme comes
in two parts. The first part is found in the
body of the legislation. Sanders' response
to the " crisis facing our planet [that] is
much more serious than they [scientists]
had previously believed " is to propose baby
steps for the first 10 years, when huge leaps
in emissions reductions are required, if you
believe the rationale for the legislation.
Yet, over the first 10 years the proposed
carbon tax will have no discernible impact
on global average temperatures, ostensibly
the basis of the legislation.
The second part of the switch is what
happens in the out years. Assuming emissions
decrease by 20% during the first
decade, the tax rate will necessarily skyrocket
to achieve the overall goal of 80%
reduction by 2050. Physics reminds us that
the difficulty and cost of the last 20% will
be exponentially higher than the relatively
easy first 20% reduction. After a decade,
the carbon tax will metastasize throughout
the economy and the government will
be addicted to the cash.
NERA Economic Consulting has also
studied the potential effects of a carbon
tax based on a more conservation 4% annual
increase of the introductory $20/
www.powermag.com
intensive sections, " according to National
Association of Manufacturers Vice President
Ross Eisenberg, quoting report findings. For
example, the report predicts the price of
gasoline will be $14.57 per gallon in 2053,
with $9.06 in tax, compared to $5.51 per
gallon with no carbon tax baseline. NERA
concluded that a carbon tax under an " 80%
reduction tax case " would cost the economy
up to 20 million jobs by 2053 and would
reduce wages about 7% and wage growth
over 8% due to increased cost of energy.
Practice Patience
The most current Environmental Protection
Agency data shows that U.S. greenhouse
gas (GHG) emissions were 11.8% less in
2012 than in 2005 (the proposed baseline
year). The trend in emissions reductions
already has a negative slope without a
carbon tax. In fact, fuel switching from
coal to gas will surely further depress GHG
emissions in the coming years.
A sense of urgency is noticeably absent
in this legislation. I also counsel patience.
Allow the economy to recover and encourage
its continuing transition to domestic
oil and gas production, and we'll watch
the carbon emissions continue to decline.
A soft landing is always preferable to a
crash and burn. ■
-Dr. Robert Peltier, PE is POWER's
editor-in-chief.
POWER | May 2013
http://www.powermag.com
POWER May 2013

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