In case anyone missed the National Petrochemical & Refiners Association estimate for costs awaiting US refiners from climate-change legislation approved last month by a key House committee, here it is: $58 billion/year. That’s “billion” with a “b.” And it’s not $58 billion over a decade or two. It’s $58 billion every year. And it would grow.
HR 2454, the American Clean Energy and Security Act, would hit refining harder than most other US industries. Refiners would face the earliest possible compliance mandate and receive disproportionately low emissions allowances under the bill’s cap-and-trade scheme. And they’d have to meet limits on emissions not only from their operations but from use of their products as well.
Heavy burden
At a carbon value of $26/ton, NPRA calculates, a 100,000-b/d refinery would have to spend about $330 million/year if required to purchase emissions allowances for its products. Extrapolation to total US capacity yields an aggregate annual cost of about $58 billion. That’s more than twice what major energy companies tracked by the Energy Information Administration earn from US refining and marketing in total every year.
The burden would force some refineries to close, crimping supplies of oil products, raising prices, and increasing US imports. But it fits a strategy. As noted in the first part of this editorial series last week, the federal government has expressed the eerie suspicion that the US produces too much oil and gas and compromises energy security as a result (OGJ, June 1, 2009, p. 18). A government so deluded may be incapable of comprehending the cost of energy mistakes.
Yet the costs of mistaken climate legislation would be monstrous. The conservative Heritage Foundation recently estimated that HR 2454, sponsored by Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) and approved by Waxman’s Energy and Commerce Committee on May 21, would, by 2035:
- Cut aggregate gross domestic product by $9.6 trillion.
- Destroy 1.105 million jobs on average, peaking in the worst years at 2.476 million jobs.
- Raise electricity rates 90% after adjustments for inflation.
- Raise inflation-adjusted gasoline prices by 74%.
- Raise residential natural gas prices by 55%.
- Raise the average family’s energy bill by $1,500/year.
- Increase the inflation-adjusted federal debt by 26%.
And these costs are for only the cap-and-trade provisions. Clean-energy mandates of the Waxman-Markey bill would intensify the pain. “Though the proposed legislation would have little impact on world temperatures,” the study says, “it is a massive energy tax in disguise that promises job losses, income cuts, and a sharp left turn toward big government.”
For such warnings, supporters of the bill have no patience. To them, conservative utterances lack credibility. Costs don’t matter. The inability of the measure to alter global average temperature doesn’t matter. Waxman-Markey supporters want the US to claim the lead in a frenzied response to global warming fear, whatever the cost.
Already, the cap-and-trade method for lowering emissions of greenhouse gases smells foul. Waxman made big compromises. Instead of auctioning emissions credits, as President Barack Obama proposed, HR 2454 allocates allowances categorically. Suddenly, industries favored with high allowance rates consider cap-and-trade a wonderful plan. Their buy-off only hints at the opportunism and corruption that await emission-credit trading and administration.
Wispy goals
The US government has interwoven the wispy goals of displacing hydrocarbons with renewable energy and manipulating global temperature measurements. Americans will pay heavily for the resulting assault on markets. They’ll pay as taxpayers through the heavy and growing subsidization of uneconomic fuels. And they’ll pay as consumers through energy costs hiked severely in what can be only a token step toward meaningful management of the climate.
In a program of energy reform that will asphyxiate itself with unreasonable ambition and governmental excess, a crushing paradox is at work. When markets raise the price of gasoline, Americans throw a political tantrum. When their government hikes the costs of energy as a matter of policy, they grovel in economic mire that’s fast becoming toxic.
Or are they just asleep?
