Cap and Trade: The Moral Equivalent of Bamboozle

Published March 1, 2003

At the start of the 108th Congress, Senators John McCain (R-Arizona) and Joe Lieberman (D-Connecticut) held a hearing on climate change in preparation for legislation they have since introduced. The legislation would mandate a cap and trade system for greenhouse gases. The idea is to cap greenhouse gas emissions and let market forces search for a least-cost way of achieving emission limits.

The supporters of cap and trade, including major environmental groups and businesses that expect to profit from it, view this as a moderate action in response to the Bush administration’s rejection of the Kyoto Protocol. It is anything but. Rather, the cap-and-trade proposal is an attempt to bamboozle: “to conceal true motives by feigning good intentions.”

At the hearing, Lieberman justified his legislative approach by asserting the Bush administration would “allow greenhouse gases to keep increasing indefinitely,” while McCain claimed the administration’s approach did not “meet the urgency” of the threat from global warming.

The only witnesses permitted to testify at the hearing were those who love government mandates, who distrust markets except when they can use them to enrich themselves, and who see environmental catastrophe on the horizon.

Flawed Assumption

The legislation is based on the assumption that human activities–making things, being a mobile society, owning a home, and creating wealth–are the primary cause of rising temperatures on the planet’s surface over the past century. Proponents assert that absent significant corrective action, those same activities will produce environmental catastrophe by 2100.

Since the United States does not intend to participate in the Kyoto Protocol, McCain and Lieberman advocate a mandatory program to reduce greenhouse gas emissions. They assert that nothing short of mandates is sufficiently responsive to the envisioned threat. Their scheme is deeply flawed.

To begin with, it presumes a conclusion about climate change that is not supported by science. The National Academy of Sciences, along with most serious climate scientists, say it is not possible to distinguish potential human impacts from natural variability, and that a significant portion of warming that has occurred in recent decades could be natural.

In addition, the projections of catastrophe these Senators rely on are the result of simulations from computer models that have not been validated scientifically. In the absence of some other agenda, it is difficult to understand why the Senators would put so much faith in models that are based mostly on assumptions rather than knowledge about critical climate processes: water vapor, feedbacks, clouds, aerosols, ocean currents, and solar variability. Knowledge of these processes would seem to be necessary to understand past climate change, to produce realistic models, and to provide a basis for credible projections into the future.

Perception Is Reality

The McCain-Lieberman proposal demonstrates that in politics, perception is reality and facts are negotiable.

Having jumped over facts that don’t support their assumptions, McCain and Lieberman combine two flawed policies–the Clinton BTU tax and the Kyoto Protocol–to produce an equally flawed legislative proposal.

Since emissions come from energy use, imposing a cap on emissions means imposing a cap on energy use. Cutting through all of the rhetoric, this is imposed scarcity–in World War II it was called rationing–and the result will be an increase in the cost of energy. A government-mandated increase in the cost of energy is a tax.

In 1993, the Clinton-Gore administration proposed a tax on the BTU content of energy. The tax was designed to force a reduction in energy use. Instead, it provoked a political backlash that forced its abandonment. People clearly understood that their costs of living and working would increase.

At least Clinton-Gore were forthright with their proposal, dubbing it a tax from day one. McCain and Lieberman are less honest, wrapping their tax in scary global warming garb to justify forcing businesses to reduce emissions, and hence energy use, to meet arbitrary targets.

That takes us to the second flawed policy, the Kyoto Protocol, which imposes mandatory targets and timetables on participating developed countries. Ratification by the U.S. would have cost the economy some $200 billion every year. McCain-Lieberman duplicates Kyoto by setting mandatory targets for 2010 and 2016.

With a growing population and growing economy, the McCain-Lieberman mandates could force a reduction in energy use of perhaps 20 percent or more. That would translate into less economic growth and fewer jobs.

Climate change is a legitimate public policy issue meriting congressional debate. But that debate should be based on facts and science; not opinions and rhetoric. The American people are entitled to straight talk on this issue and how to address it. They are not getting it from cap and trade advocates.

William O’Keefe is president of the George Marshall Institute.