Free markets can best address environmental problems
The Tennessee Center for Policy Research’s Allyn Milojevich explains how free market environmentalism is a better solution than cap and trade in Sunday’s Tennessean. Allyn is the recent author of Cap & Trade: A (Lame) Duck Proposal, which shows the economic impact cap and trade would have on Tennessee. To read the study, click here. by Allyn Milojevich In June 2009, the U.S. House of Representatives passed “cap and trade,” aiming to reduce greenhouse gas emissions by 83 percent over the next four decades. While the bill is best known for enacting a system of carbon credits that can be traded on a pseudo-market, it also creates a series of regulations meant to subsidize renewable energy. Most of these renewable sources of energy have been unprofitable in the private sector and their use will only increase consumer costs. The Senate is expected to put similar legislation to a vote after the November election. In Tennessee, it is estimated that the cap and trade system would cause gasoline prices to rise by 27 percent, electricity prices 64 percent and natural gas prices 73 percent over the next two decades. The average household energy bill could increase from $124 to $327 each month by 2030. The cap and trade scheme would disproportionately impact those on fixed incomes, such as the elderly. Because they spend a larger percentage of their income on energy, those with the lowest incomes would face a 5 percent jump in their energy costs. Further, due to an increase in manufacturing costs, up to 52,000 jobs could be lost in Tennessee alone. Tennessee’s schools, universities and hospitals could also experience a 20 to 30 percent increase in energy prices, forcing tuition and medical bills to rise. Higher energy prices would have a large impact on Tennessee’s gross state product (GSP). It is estimated that Tennessee’s GSP could drop by $9.8 billion annually. Manufacturing as a whole might fall as much as 6.6 percent while energy intensive sectors — like chemical processing and automobile production — could plummet by as much as 14 percent. The “other half” of the House-approved bill proposes a “renewable portfolio standard” (RPS), requiring utility companies to provide 20 percent of their energy from “green” sources. These sources are expensive and inefficient, though Tennessee has already pledged taxpayer dollar towards this difficult goal. The state, in conjunction with the University of Tennessee, has allocated $32.5 million for a solar farm in Haywood County. While this project may create a few jobs, it is unlikely to raise the percentage of Tennessee power from solar sources far above one percent. The legislation also cements in place the use of ethanol as a fuel. Tennessee has supported “ethanol hysteria” by making an initial investment of $40.7 million, and promising an additional $5.3 million annually, to build a plant for converting switchgrass to ethanol. Before taxpayers get too excited about this alternative energy they’re investing in, it should be noted that according to the venture’s chief executive, “technology for converting switchgrass into fuel is still in development.” Tennesseans should turn to the free market, clearly defined property rights and tort law to efficiently address environmental problems. Private enterprises have also attempted to address carbon concerns without government prodding, such as Calera, a California-based company that developed a method for transforming CO2 into cement. Rather than fix our nation’s environmental troubles, cap and trade legislation will do nothing more than harm Tennessee families already struggling to stay afloat. Allyn K. Milojevich is a research fellow at the Tennessee Center for Policy Research, the state’s free market think tank.