Last year, the US Senate tried to advance a national energy tax, which masquerades as a cap-and-trade program, sponsored by Senators Joseph Lieberman (I-CT) and John Warner (R-VA). After the policy was defeated, ten Democrats sent a letter to Senate Majority Leader Harry Reid (D-NV) and Senator Barbara Boxer (D-CA), Chairman of the Committee on Environment and Public Works, stating their opposition to the proposed plan. The Senators, all from “regions of the country that will be most immediately affected by climate legislation,” believed the plan would harm their local economies. They set forth several criteria that would be essential to earning their support:

• Contain Costs and Prevent Harm to the U.S. Economy
• Invest Aggressively in New Technologies and Deployment of Existing Technology
• Treat States Equitably
• Protect America’s Working Families
• Protect U.S. Manufacturing Jobs and Strengthen International Competitiveness
• Fully Recognize Agriculture and Forestry’s Role
• Clarify Federal/State Authority
• Provide Accountability for Consumer Dollars

The harsh reality is that no matter how you construct a national energy tax those conditions will never be satisfied. That includes the discussion draft currently being debated in the House Energy and Commerce Committee that is sponsored by Congressmen Henry Waxman (D-CA) and Ed Markey (D-MA). Let’s quickly take the provisions one-by-one.

Contain Costs and Prevent Harm to the U.S. Economy
A Heritage Foundation analysis of Waxman-Markey found that implementing the bill would reduce aggregate gross domestic product (GDP) by $7.4 trillion and destroy 844,000 jobs on average, with peak years seeing unemployment rise by over 1,900,000 jobs. Even the Congressional Budget Office admits such a scheme “would be likely to reduce GDP.” Simply put, there is no way to levy a national energy tax without harming the economy.

Invest Aggressively in New Technologies and Deployment of Existing Technology
Thus far, Waxman-Markey has failed to address the crucial issue of how to spend the taxes that would be collected. Last year’s bill outlined more than half a trillion dollars for such programs. Of course, no amount of investment would prevent the economic destruction forecasted.

Treat State Equitably
According to the Heritage Foundation’s Manufacturing Vulnerability Index, any tax on carbon emissions will have a disproportional impact on heavy-coal and manufacturing states. The aforementioned CBO testimony states, “some regions and industries would experience substantially higher rates of unemployment and job turnover as the program became increasingly stringent.” No amount of subsidies or handouts will protect a vulnerable region, especially as the program’s intensity increases.


Protect America’s Working Families
Once again, the CBO provides clarity to the issue, declaring “Under a cap-and-trade program, consumers would ultimately bear most of the costs.” They go on to say that “Such price increases would be essential to the success of a cap-and-trade program.” Despite that, many policymakers believe they can hold individuals harmless under a national energy tax. CBO clearly disagrees, saying, “no program could address all the region- and household-specific circumstances that could affect families’ costs.” Waxman-Markey would raise an average family’s annual energy bill by $1,500, and increase inflation-adjusted federal debt by 29 percent, or $33,400 additional federal debt per person, again after adjusting for inflation.

Protect U.S. Manufacturing Jobs and Strengthen International Competitiveness
According to The Heritage Foundation, last year’s proposal would cause manufacturing job losses to approach nearly 3 million by 2028. President Obama and others have claimed that so-called “green jobs” will help reverse this devastating loss, but recent history suggests that an emphasis on green jobs will do more harm than good. (see studies from Spain, Senator Kit Bond (R-MO), Heritage and the Institute for Energy Research)

Fully Recognize Agriculture and Forestry’s Role
Look no further than the Chairman of the House Agriculture Committee, Collin Peterson. Peterson said “I will not support any kind of climate change bill — even if you fix this — because I don’t trust anybody anymore. I’ve had it.” Clearly, Peterson does not believe agriculture will be treated “fairly” under a national energy tax. Of course, even satisfying Peterson’s demands would not make a national energy tax good policy.

Clarify Federal/State Authority
Regardless of how policymakers implement cap and trade, it would be a regulatory nightmare. While the concerned Senators purported last year that federal authority trump state authority if a harmonization of regulations could not be met, either way is susceptible to inefficiency and mismanagement of the economy. For instance, the Environmental Protection Agency (EPA) issued an endangerment finding, saying that global warming poses a serious threat to public health and safety. Thus, almost anything that emits carbon dioxide and other greenhouse gases could be regulated by a single agency, the EPA. Regardless of federal, state or some combination of both having authority, the red tape and permitting delays are almost unfathomable.

Provide Accountability for Consumer Dollars
This demand may be the most onerous of them all. With energy lobbyists drafting the details behind closed doors and the administration’s admitted difficulties in tracking the so-called stimulus funding, accountability seems like a pipe dream.

Waxman-Markey clearly fails to address these valid concerns, but also fails to win approval from last year’s sponsor, Senator Joseph Lieberman (I-CT). This policy proposal would not be well received in the Senate, according to Lieberman, because “The early targets are high — higher than the Senate will accept and higher than what we can do, because they impose too much of a burden, particularly on people in states that burn a lot of coal or produce a lot of electricity.”

When considering Waxman-Markey, policymakers must recognize that a national energy tax is inherently flawed and no amount of handouts or subsidies can minimize that danger.