A Day at the Waxman-Markey Hearings

by Frank Ackerman

April 23, 2009

It must be worthwhile; at least, I keep doing it. Wednesday was the third time in the last eight months that I’ve testified before a House committee about the costs of inaction on climate change, a topic I study at the Stockholm Environment Institute-US Center, a research institute affiliated with Tufts University in Boston.

The Energy and Commerce Committee launched a week of hearings on the Waxman-Markey bill, the “American Clean Energy and Security Act of 2009”; by one account, they have invited 67 witnesses to testify.

Wednesday was a staggeringly long day, beginning with Cabinet secretaries at 9:30 in the morning, then a panel of USCAP members (an alliance of major corporations and environmental groups, in support of climate legislation), then a panel that was half conservatives and skeptics (guess which party insisted on inviting them), and finally, starting just before 6:00 PM, the panel on green jobs and economic benefits, where I ended up. The committee members and the media, unsurprisingly, pay most attention to the highest-profile witnesses early in the day, and fade away as the hours go by. My oral testimony was heard by three committee members, Ed Markey in the chair and two Republicans who stuck around to ask unfriendly questions (my full testimony is here). Surprisingly, I agreed with one of the rhetorical points made by the Republicans this time: alleging that the Democratic leadership was having secret discussions about who should get allowances under a cap and trade system, they wanted to know if each of the witnesses favored transparency in allocation of allowances, and 100 percent auctioning of allowances. I may have made their day by endorsing transparency and 100 percent auctioning.

The research which accounts for my invitations to testify is a series of studies of the costs of inaction on climate change: one for the U.S. as a whole, done for NRDC; and one for Florida, and a shorter study for the Caribbean, both done for the Environmental Defense Fund. Apparently, no one else has produced hard (well, quasi-hard) numbers on what “business as usual” will cost. Our studies (here) emphasize that they are only partial estimates for some of the multiple categories of damages that will result from climate change; even so, the numbers dwarf the expected costs of climate policy initiatives.

In the panel before mine, Nat Keohane, an economist from EDF, did an admirable job of answering the Heritage Foundation, Competitive Enterprise Institute, and others of their ilk. I was happy to note that he quoted our work, making exactly the point I would have: the costs of doing something about climate change are much smaller than the costs of doing nothing. I, in turn, tried to use some of my brief time to address another issue that was brought up by the conservative witnesses: fears that putting a price on carbon emissions will harm US competitiveness are greatly exaggerated. China’s comparative advantage lies in labor-intensive, not carbon-intensive goods; China’s exports are not uniquely carbon-intensive, compared to its imports or domestic industries. Moreover, there is more than one way to be competitive in the world economy; Germany has high wages, high fuel costs, strict European environmental regulations – and a huge trade surplus, much of it in manufacturing. We’re not likely to make our economy more like China, but we could probably learn something from Germany about high-wage, low-emission competitiveness.

It was too late in the day for anyone to respond to my point about competitiveness in the hearing on Wednesday. Maybe I can testify about that next time.

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Frank Ackerman is a Senior Economist at Synapse Energy Economics.

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