Heritage Foundation analysts David Kreutzer and Kevin Dayaratna yesterday released a study on the economic impact of carbon tax legislation (the Climate Security Act of 2013) sponsored by Sens. Barbara Boxer (D-Calif.) and Bernie Sanders (I-Vt.). The Boxer-Sanders legislation would establish a new tax that starts at $20 per ton of carbon dioxide (CO2) emitted and increases by 5.6% annually.

As Kreutzer and Dayaratna point out, hydrocarbon fuels supply 85% of all the energy Americans use, and “basic chemistry” dictates that CO2 will be emitted when those fuels are oxydized (burned) to release energy. The economic implications of those facts are significant and unavoidable:

Therefore, a tax on CO2 would be a tax on the 85 percent of energy derived from hydrocarbons and would increase energy costs broadly. The higher energy costs would ripple through the economy, driving up costs of production of virtually all goods and services. Faced with higher costs for energy and other goods, consumers would cut consumption, translating into a reduction in sales and a marked decline in employment. Though rebating the tax partially offsets these impacts, there would still be a net loss of income and jobs.

Using an energy model derived from the Energy Information Administration’s National Energy Model System (NEMS), the Heritage scholars calculate that, compared to a no-carbon tax baseline, the Boxer-Sanders proposal would:

• Reduce the income of a family of four by more than $1,000 per year.
• Reduce employment by more than 400,000 jobs in 2016.
• Decrease coal production by 60% and coal employment by more than 40% by 2030.
• Decrease employment 10.4% and 20.9% in the iron and steel and aluminum industries, respectively, by 2030.
• Increase gasoline prices $0.20 by 2016 and $0.30 before 2030.
• Increase electricity prices 20% by 2017 and more than 30% by 2030
• Increase federal taxes by $3 trillion through 2030.
• Reduce GDP by $92 billion in 2020 and $146 billion in 2030.
• Decrease projected global warming by, at most, 0.11C by 2100 [probably too little to be reliably detected].

My two cents: The Boxer-Sanders proposal exhibits the same old abysmal cost-benefit ratio that preempted U.S. ratification of the Kyoto Protocol and scuttled the Waxman-Markey cap-and-trade bill. Boxers and Sanders must surely know that a carbon tax has no chance of passing as a stand-alone bill. The Climate Security Act is thus a messaging bill designed to move public debate in favor of including carbon taxes in “comprehensive tax reform.” The Heritage study is a valuable and timely antidote to the message Boxer and Sanders are promoting.

Blocking the Keystone XL Pipeline – the $7 billion, 1,700-mile project that could create 20,000 construction jobs and eventually transport 830,000 barrels of tar sands oil from friendly, stable, democratic Canada to hubs in Oklahoma and Texas — has become the environmental movement’s top agenda item.

This is not surprising, because Canada’s booming oil sands industry demolishes two popular narratives of green ideology — the claim that oil is a dwindling resource from which we must rapidly decouple our economy before supplies run out, and the notion that most of the money we spend on gasoline ends up in the coffers of unsavory regimes like Saudi Arabia. In reality, more than half of all the oil we consume is produced in the USA, and we get more than twice as much oil from Canada as from Saudi Arabia.

Much of the anti-Keystone agitation is vintage ’60s stuff. In late August, during a weeks-long protest rally outside the White House, 800 demonstrators (including celebrities Margot Kidder and Daryl Hannah) were handcuffed and bused to local police stations. In late September, more than 100 demonstrators were arrested trying to enter Canada’s House of Commons. In October, 1,000 protesters showed up outside President Obama’s $5,000-a-head fundraiser in San Francisco, and organizers claim 6,000 demonstrators will encircle the White House on Sunday, Nov. 6.

Meanwhile, oil bashers on Capitol Hill are engaging in some political theater of their own. Last week, Sen. Bernie Sanders (I-Vt.), two other senators, and 11 congressmen requested that the State Department’s inspector general (IG) investigate an apparent conflict of interest in the preparation of State’s Environmental Impact Statement (EIS) for the Keystone XL Pipeline.

Sanders et al. point out that Cardno/Entrix, the firm State commissioned to conduct the EIS, listed TransCanada, the corportion proposing to build the pipeline, as a “major client.” This “financial relationship,” they suggest, could lead Cardno/Entrix to low-ball the project’s environmental risks. They even insinuate that Cardno/Entrix may have understated oil spill risk just so it could later get paid by TransCanada to clean up the mess.

Earlier this week, State responded to Sanders et al. As far as I can see, there’s no there, there.

First, though, some background on the procedural issues.

Because the proposed pipeline is “international” (crossing the U.S.-Canada border), State is the agency tasked with granting or denying approval, known as a “Presidential Permit,” based on a “National Interest Determination.” That is, Secretary Clinton must determine whether or not the pipeline is in the national interest.

State’s EIS is a key step in the overall review process. Such analyses are mandatory under the National Environmental Policy Act (NEPA), which obligates agencies to consider all significant environmental impacts of a major action before undertaking it. However, notes the Congressional Research Service, NEPA ”does not require federal agencies to elevate environmental concerns above others.” An agency may decide that ”other benefits outweigh the environmental costs of moving forward with the action.” That is widely expected to happen with Keystone, and it is driving the warmists bonkers. Keystone foes’ last desparate hope is that a scandal over the EIS will turn things around and doom the pipeline.

As State explains in its letter to Sanders, the EIS — over 1,000-pages long and three years in the making — was quite thorough. State conducted two rounds of public meetings, more than 40 in total, along the proposed route, the first after publication of the draft EIS and then again after release of the final EIS, “to inform the national interest determination.” This was the first time State ever convened a second set of public meetings in connection with an EIS. In addition, State worked closely with the Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) “to identify a set of 57 conditions, with which the applicant agreed to comply should the permit be granted, that go above and beyond the safety requirements of other pipelines.”

Of course, many protesters — and even some congressmen – may feel that any oil spill risk is intolerable and disqualifying. But by that standard, no pipeline should ever be built, all existing pipelines should be dismantled, and all commerce in petroleum should stop. And then we could all live in Medieval squalor — planet saved!

As to alleged conflicts of interest, when Cardno acquired Entrix, the new firm, Cardno/Entrix, did issue a press release listing TransCanada as a “major client.” However, TransCanada was a client only in the sense that “the federal government had selected Entrix to do third-party contract work for four TransCanada permit applications — two with the Federal Regulatory Commission (FERC) and two with the Department of State” (emphasis in original).

State’s letter continues:

Under NEPA regulations, this does not constitute a conflict of interest; the federal government is the client — the federal government is selecting and directing the work of Entrix (now Cardno/Entrix) — not TransCanada (whose projects were being assessed). While the pipeline applicant pays the contractor — in this case Entrix (now Cardno/Entrix) – the contractor (Entrix) takes direction from, and reports solely to the Department in accord with NEPA’s regulations, which prioritize the taxpayer over the applicant company by ensuring the taxpayer does not bear the financial burden of the assessment.

So yes, Sanders is correct, Cardno/Entrix had a “financial relationship” with TransCanada. But only because Entrix had conducted environmental reviews of other TransCanada projects for State and FERC. If Sanders considers that to be an ethically compromising conflict of interest, then logically he should oppose all other NEPA-mandated environmental reviews as similarly tainted!

To avoid such alleged conflicts of interest, will the Sanders gang advocate that taxpayers fund environmental reviews when corporations seek federal agency approval to drill oil wells, dig mines, inject fracking fluids, construct pipelines, build dams, harvest timber, etc.? But wouldn’t that (according to their worldview) be giving corporate welfare to “polluters”?

State’s letter does not say whether Cardno/Entrix has a contract to provide oil spill response for the Keystone pipeline. Until the IG investigates this, I will assume that Cardno/Entrix’s expertise in spill response is one of the reasons the company was well qualified to conduct the EIS.