The Public Policy

Terminating the Economy

The Governator melts down on global warming.

By 7.1.05

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"We're all Keynesians now," declared President Richard M. Nixon when he surrendered his fiscal policies to liberal orthodoxy. Gov. Arnold Schwarzenegger did much the same with his recent executive order calling for draconian cuts in the emission of "greenhouse gases" linked to global warming. "The debate is over," he claimed.

The issue of global warming, though presented as a matter of scientific certainty, is actually highly controverted. Although the planet almost certainly is warming, how much of that is due to humanity -- which contributes only about .3 percent of total greenhouse gas emissions -- remains in dispute.

So does the likely magnitude of warming, as well as the ultimate impact on the climate. Over the last decade predictions of the temperature rise over the coming century have fallen greatly, with the most realistic estimates lagging behind the increase during the "little climate optimum," the Medieval period roughly 2.5 degrees centigrade warmer than today.

Indeed, moderate warming at night and in the northern hemispheres, when and where most of the recent warming has occurred, is a positive development for humanity. Such a temperature rise lowers morbidity and mortality rates and lengthens growing seasons.

Moreover, most of Schwarzenegger's claimed consequences of global warming simply aren't true. Joel Schwartz, a visiting fellow at the American Enterprise Institute, notes that warmer temperatures won't increase heat-related mortality, which has fallen by 75 percent since the 1960s.

Nor is the phenomenon related to asthma, as Schwarzenegger claimed. And higher temperatures are more likely to reduce than increase other air pollutants.

NEVERTHELESS, ASSUMING THAT global warming is a problem to be solved, the so-called Kyoto treaty, signed in December 1997, is not a good answer. By its own terms it would merely mean that the temperature predicted to occur in 2100 (any estimate a century off is essentially meaningless) would actually arrive in 2106.

Kyoto's original objective, to hold energy consumption at 1990 levels, is well-nigh unattainable, at least at acceptable cost. And since the Kyoto pact did not cover developing states, most importantly rapidly growing China and India, today's industrialized states would have to cut their energy consumption even more.

Even a dozen European nations that once championed Kyoto now concede that they will fall short. Notes Frances B. Smith of the group Consumer Alert, "People cannot simply turn up their air conditioner thermostats to 72 degrees from 70, or replace 75 watt light bulbs with 60 watt bulbs. Instead, the proposed Kyoto accord will require drastic reductions in energy use in every aspect of people's every day lives."

And that won't be easy. "Energy is the lifeblood of industrial civilization," observed Case Western University Law School Professor Jonathan Adler. Radical reductions in energy consumption mean radical reductions in economic activity.

Among the steps proposed to force down U.S. energy consumption are an emissions cap on greenhouse gases, especially carbon dioxide; a "carbon tax" on fossil fuel consumption; an increase in fuel economy (CAFE) standards on autos; new building codes and appliance energy standards; a national deposit on beverage containers; regulations encouraging high density home construction and discouraging driving; and a variety of subsidies for alternative energy sources and fuel efficient cars. Since fossil fuels remain the world's most plentiful and cost-efficient energy source, none of these steps would be cheap.

Total economic output would take a huge hit. Over the last decade or so estimates have ranged up to $350 billion annually. In the mid-1990s this represented an economic loss of up to $1,500 per person. Eugene Trisko of the United Mineworkers of America warned that "most credible estimates of the costs of reducing carbon emissions in the U.S. show cumulative GDP losses of up to $1 trillion to $3 trillion over a 15 or 20 year period."

Another cost measure is job loss. Estimates vary, but the projected magnitude is consistent. For instance, an early study by Wilbur Steger and Frederick Rueter for CONSAD Research Corporation predicted that between 240,000 and 360,000 jobs would be lost in the first three to five years after Kyoto's implementation, "and would be accompanied by adverse economic conditions, including high inflation, resembling the energy price shocks of the 1970s."

Within a few more years lost employment could rise above 1.6 million, with several more million jobs at risk in "vulnerable industries." Their work matches the results of a study by the consulting firm DRI, Inc., which predicted 1.7 million lost jobs. A Clinton administration study foresaw an employment loss of 900,000.

THE MORE STRINGENT THE STANDARDS, the bigger the impact. Steger and Rueter considered proposals to reduce rather than stabilize energy usage (at the time based on 1990 levels). They warned: "We are looking at magnitudes of short-to-medium-term output, employment and value added effects that are double, triple, or possible even five times greater." The economic cost of large, arbitrary cuts in energy consumption would be enormous.

Another measure is energy price. Although the results depend upon the exact measures adopted, the Department of Energy projected a 50 percent hike in electricity rates. Another estimate foresaw a 60 cent a gallon increase in gasoline prices and a 50 percent jump in home fuel costs.

Price increases would ripple through the economy, from food to airline travel to heating to services to government operations. Higher energy prices and new regulations would cause other, indirect harms. Frances Smith points out that "numerous studies have shown the relationship between income and health." Sucking hundreds of billions of dollars out of the economy through higher energy prices would reduce money for other uses, ranging from health care to safe housing.

Moreover, some energy-saving measures are positively dangerous. For instance, CAFE standards push people into smaller cars, which lose when involved in car accidents with larger autos and trucks. Raising the standard to 40 mph would, according to a Harvard University-Brookings Institution study, cause an additional 3,800 to 5,800 accident deaths every year.

CALIFORNIA, THE NATION'S MOST populous state, would bear a large share of Kyoto's burden. The Golden State leads the country in energy consumption. Dramatically cutting back on energy consumption would leave California as the biggest loser.

But Schwarzenegger doesn't want to just reduce energy use. He hopes to largely eliminate the consumption of traditional fuels. Joel Schwartz figures that Schwarzenegger's energy plan would cut energy use by 11 percent in 2010, 25 percent in 2020, and 87 percent in 2050.

Extrapolating from a federal study of national energy controls, Schwartz estimates that an 11 percent reduction would cost about $40 billion. He warns: "While reducing GHG [greenhouse gas] emissions to 1990s levels would impose hardship, attempting to reduce GHGs 80 percent below 1990 levels would amount to destroying California in order to save it."

With the facts against him, Schwarzenegger repairs to the usual political redoubt of "protecting" the children: "We have no choice but to meet this challenge. We must leave a better world for our children and their children."

If it cost nothing to reduce use of fossil fuels, we could let sentimentalism rule and ignore serious doubts about the dangers posed by global warming. But wrecking the economy would be a high price to pay to deal with a phenomenon of uncertain magnitude that might end up being transitory and even positive.

Gov. Schwarzenegger was elected governor after promising to combat job-destroying regulation. Now he is proposing controls far more stringent than anything advanced by local Democrats. Alas, the more Republican politicians claim to represent the future, the more they look like their opponents.

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About the Author
Doug Bandow is a senior fellow at the Cato Institute. A former Special Assistant to President Ronald Reagan, he is the author and editor of several books, including The Politics of Plunder: Misgovernment in Washington (Transaction).