Proponents of the Waxman-Markey (W-M) cap-and-trade bill assure us it will cost the average household less than a postage stamp a day. The Heritage Foundation’s energy team — David Kreutzer, Ben Lieberman, Karen Campbell, William Beach, and Nicolas Loris — have rebutted this claim six four ways from Sunday (see here, here, here, and here).
Some postage stamps, of course, cost more than most people’s homes. For example, this rather plain looking item, a two-pence stamp issued by the Mauritius post office in 1847, sells for $600,000 or more.
Now, nobody is saying that Waxman-Markey will cost the average household what it costs to buy a mansion, but the National Association of Home Builders (NAHB) estimates that W-M could increase the purchase price of a new home by $1,371 to $6,387, and that this would have the effect of making 337,000 to 1.57 million households unable to qualify for a home mortage. Repeat after me: “Law of Unintended Consequences!”
NAHB summarizes its analysis on pp. 13-14 of its December 30, 2009 comment on various EPA rulemakings regarding greenhouse gases (GHGs) under the Clean Air Act. Here are the main steps:
- To produce the materials used to construct a typical single-family home (2,420 square feet plus two-car garage), manufacturers emit 55.42 metric tons (MT) of carbon dioxide-equivalent (CO2-e) GHGs.
- The U.S. Energy Information Administration (EIA), using a 4% discount rate, projects that under W-M, carbon allowances in 2030 would cost between $19 and $87 per MT.
- Manufacturers’ costs for producing homebuilding materials would increase by $1,037 to $4,831 per single family home (when I do the arithmetic, I get an increase of $1,052 to $4,821).
- Factor in additional financing and broker commissions, and the price of a typical single-family home would increase by $1,371 to $6,387.
- To qualify for a mortgage, borrowers may not exceed a specific “front end ratio” — the percentage of income that would be consumed paying principal and interest on the mortage, plus property taxes and insurance. A common standard is that these payments should not exceed 28% of household income.
- In the low-cost case (carbon permit price = $19/MT CO2-e), roughly 337,000 households that would qualify for a mortgage before the W-M-induced price increase, no longer qualify. In the high-cost case (carbon permit price = $87/MT CO2-e), approximately 1.57 million U.S. households are priced out.
Some enterprising reporter should jump on this. What do Reps. Waxman and Markey have to say about NAHB’s analysis? When they drafted the bill, what assumptions did they make about its potential impacts on housing prices and homeownership? Indeed, can they adduce any evidence that they gave even a moment’s consideration to these important matters?
Accuweather’s meteorologist Joe Bastardi has a new video titled “Worldwide Cold not Seen Since 70s Ice Age Scare.” Bastardi points out that the frigid conditions affecting significant parts of the world today – North America, Europe, and Asia – are very similar to the patterns in the 1970s, when fears of a new Ice Age were hyped by the media. He repeatedly compares maps of the cold spots from January 1-10, 1977 and current ones and notes the strong similarities:
Here’s what we had then, here’s what we have now. Then, now. Then, now.
In referring to the current global warming alarms, Bastardi asks:
How could this be global warming, but 34 years ago, that was an Ice Age coming?
Good question.
Certain influential forces in the environmental movement – most notably James Hansen of NASA – have expressed disquiet with the inability of democracies to deal with their imagined “climate crisis,” leading to sentiments like this one from Australian authors David Shearman and Joseph Wayne Smith:
We need an authoritarian form of government in order to implement the scientific consensus on greenhouse gas emissions
Climatologists Nico Stehr and Hans von Storch discuss this argument at Roger Pielke Jr’s blog. Thankfully, the demands for an “Ecologocracy,” for want of a better term, are not yet universal in the environmental movement. They conclude:
Finally, the growing impatience of prominent climate researchers constitutes an implicit embrace of now popular social theories. We think in this context especially of Jared Diamond’s theories on the fate of human societies. Diamond argues that only those societies have a chance of survival which practice sustainable lifestyles. Climate researchers have evidently been impressed by Diamond’s deterministic social theory. However, they have drawn the wrong conclusion, namely that only authoritarian political states guided by scientists make effective and correct decisions on the climate issue. History teaches us that the opposite is the case.
Therefore, today’s China cannot serve as a model. Climate policy must be compatible with democracy, otherwise the threat to civilization will be much more than just changes to our physical environment.
Indeed. In fact, there may be another reason for those who despise greenhouse gas emissions also to despise democracy. and it is precisely linked to the threat to civilization. We know that the best indicator of low greenhouse gas emissions is poverty. As Daron Acemoglu shows, rejecting Diamond, poverty is strongly linked to the lack of market institutions that democracy protects:
People need incentives to invest and prosper; they need to know that if they work hard, they can make money and actually keep that money. And the key to ensuring those incentives is sound institutions — the rule of law and security and a governing system that offers opportunities to achieve and innovate. That’s what determines the haves from the have-nots — not geography or weather or technology or disease or ethnicity.
Put simply: Fix incentives and you will fix poverty. And if you wish to fix institutions, you have to fix governments.
To put it another way, the authoritarian solution to the global warming problem, in so far as it exists, is the imposition of poverty, for that is the inevitable result of the restriction of energy use that is the authoritarians’ sine qua non. Those of us who are trying to think of alternative solutions to the problem, however, are convinced that it is the same institutions that have delivered us from poverty that will deliver us from whatever ills a warmer world might impose. To see more on this, check out Marlo Lewis’ film Policy Peril, in particular this segment.
RSS Updates 
RSS E-Mail Updates 
CEI.org