An ominous carbon audit of the U.S. tax code and other expensive environmental special-interest programs are soon to be implemented because of the Wall Street bailout legislation passed by Congress on October 3 and subsequently signed by President George W. Bush.
Section 117 of the legislation directs the National Academy of Sciences to “undertake a comprehensive review” of the federal tax code “to identify the types of and specific tax provisions that have the largest effects on carbon and other greenhouse gas emissions and to estimate the magnitude of those effects.”
While the $700 billion bailout has been billed as a necessary, if expensive, government intervention to fend off a potential economic catastrophe, the carbon audit and supplementary environmental special-interest provisions promise to drain rather than stimulate economic activity, analysts say.
Higher Prices, EU Failures
Carbon dioxide emissions are a byproduct of industrial activity. Economists agree the only way to reduce emissions significantly is to make fossil fuels more expensive, presumably thus reducing their share of the current U.S. energy mix. That would force greater reliance on significantly more expensive alternative energy sources, such as wind and solar, resulting in a substantial increase in consumer energy bills and expenses for business. The prices of all goods and services would rise.
A carbon audit with a long-term goal of forcing consumers to pay more for the same energy they purchase cheaply today is a surefire way to further punish the American economy, says economist Sterling Burnett, Ph.D. of the National Center for Policy Analysis.
“Congress can mandate all the audits they want, but they can’t change the laws of economics,” Burnett noted. “The Europeans have tried the same types of carbon restrictions, and their economies have been paying a terrible price as a result. They are now backing away from greenhouse gas limits as fast as they can, for good reason. Yet we are now diverting attention away from the core economic problems that led to such bailout legislation, while instead directing analysts to figure out how we can emulate Europe’s failures.”
More Subsidies for Renewables
In addition to a comprehensive audit of the federal tax code, the bailout legislation extends favorable tax treatment to wind, solar, and other renewable fuel technologies. With those sources already subsidized by federal taxpayers by more than $23 per megawatt hour of electricity produced, the bailout legislation directs additional money from taxpayers into the pockets of the economically uncompetitive renewable power industry.
“Only Congress could take a bill it considered too bad to pass, get a worse bill back, and then pass it with great fanfare a week later,” Burnett observed. “They took a bad bill, made it 300 pages longer, and littered it with green pork and pet projects that have absolutely no stimulating effect on the economy, and then passed it as an even worse one.
“Subsidizing inefficient technology that cannot compete economically is not a stimulus—it is a drain on economic resources. If we are teetering on the verge of an economic catastrophe, these provisions are more likely to push us over the cliff than to pull us away from the abyss,” added Burnett.
James M. Taylor ([email protected]) is a senior fellow of The Heartland Institute and managing editor of Environment & Climate News.