The president reiteratedhis commitment to comprehensive clean-energy and climate reform in hisState of the Union address last week and his budget proposal releasedon Monday.
The bipartisan effort to advance legislation in the Senate remains strong, and Americans continue to strongly support action on global warming. Yet recent reports from the Heritage Foundation and the Milken Institute—commissionedby the National Association of Manufacturers—are misleading about howthese energy reform measures will affect the economy. They are adistraction from the real debate about how to best move forward tosecure our economy and national security, and protect our planet fromthe effects of climate change. Here’s a quick look at what they gotwrong.
The Milken Institute’s “Jobs for America: Investments and Policiesfor Economic Growth and Competitiveness” proposes reducing the U.S.corporate income tax rate to “match” Organisation for EconomicCo-operation and Development countries. Yet many of these countriesactually have higher corporate tax rates and providing regulatorycertainty would go further toward bringing investment into the UnitedStates.
Most other countries have higher corporate tax rates. Milkenargues that reducing the tax rate to 22 percent would increase U.S.exports and boost domestic competitiveness. But Milken fails torecognize that the effective tax rate—the rate that companies actuallypay—is only around 22.2 percent, which is lower than the OECD average.Companies already enjoy numerous tax incentives that encourageinvestment and growth in the United States. Both the amount and valueof some of these incentives increased in the past two stimulus packages and further business tax breaks are included in the president’s budget.
In a time of fiscal uncertainty, we need regulatory certainty. Insteadof focusing on lowering already low corporate tax rates, we should beproviding businesses the regulatory certainty they needto make the United States a better place to invest. Passingclean-energy and climate legislation will send clear market signalsrewarding companies that advance clean-energy innovation andtechnology. Clean-energy reform will level the playing field and putthe United States back in the lead of the clean-energy race where it iscurrently falling behind.
The Heritage Foundation’s “What Boxer-Kerry Will Cost the Economy”is selective and incomplete. It leaves out major provisions in thebill, mainly consumer assistance and energy efficiency. And itsanalysis of the Kerry-Boxer bill, or the Clean Energy Jobs and AmericanPower Act (S.1733), relies on the IHS Global Insight model thatprojects cap-and-trade costs only, and these costs are grosslyoverestimated. It also effectively ignores any benefits from energyefficiency and investments in renewable energy technology.
Kerry-Boxer will stimulate innovation and growth in clean-energy technologies. Heritagedoes not incorporate energy efficiency and renewable energy mandatesand standards because it says they are redundant and inefficient. Itsimply notes that, “overall losses to GDP and employment are likely tobe estimated” as a result of implementing such standards and mandates.They fail to recognize the key role these will play. As the EPA’s analysis of S. 1733shows, “the bill would transform the structure of energy production andconsumption, moving the economy from one that is relatively energyinefficient and dependent on highly-polluting energy production to onethat is highly energy efficient and powered by advanced, cleaner, andmore domestically-sourced energy.”
Revenue generated from the program will help get cleaner sources ofenergy off the ground, including natural gas, renewables, nuclear, andcoal using carbon capture-and-storage technology. The Senate’s CleanEnergy Jobs and American Power Act also has provisions to spurinvestments in these types of technologies. Such investments will givethe United States a much-needed competitive edge in innovation and themanufacturing of new clean-energy technologies.
Consumers are protected in the bill. Heritage makesextremist warnings of higher energy prices, but ignores consumerprotection and cost-containment provisions in the bill. The pollutionreduction program allocates 30 percent of revenuesfrom the program to local electric distribution companies, which arerequired to “protect consumers from electricity price increases.” Italso overlooks cost-containment provisions, including a minimum reserve auction price and a strategic reserve.
Manufacturers are protected in the bill.Kerry-Boxer provides assistance for energy-intensive andtrade-sensitive industries, allocating 15 percent of allowance revenuesin 2014 and 2015 to help manufacturers develop more efficientpractices. The Environmental Protection Agency concludes that this allocation is more than sufficient to protect the manufacturing sector.
Ratepayers will only have modest costs. Under bothKerry-Boxer and the House-passed American Clean Energy and SecurityAct, the Environmental Protection Agency estimates that average costsper household will be between $80 and $111 annually. The NaturalResources Defense Council estimates that by 2020, the average Americanhousehold will save $6 per month in energy costs due to the investmentand efficiency provisions in the American Clean Energy and SecurityAct, which is so similar to Kerry-Boxer that the costs would be the same. The states with the biggest savings are also those most dependent on coal: Ohio, West Virginia, and Pennsylvania, among others.
Clean-energy and climate reform will save consumers money. Theaverage family’s annual spending on oil, gas, and electricity rose bymore than $1,130 under the Bush administration’s energy policies. An analysis of ACES finds that low-income consumers would receive $40 per year in 2020, and the American Council for an Energy-Efficient Economy projects that Americans could save $750 per household by 2020 and $3,900 by 2030.
Clean-energy and climate reform will create jobs. Heritage cites two European studies to promote its anticlean-energy initiatives message. Yet both studies have been widely discredited. A Center for American Progress and University of Massachusetts study found that investing $150 billion in clean energywould create approximately 1.7 million new jobs in industries asdiverse as new materials science, engineering, construction, andmanufacturing. The same study found that investing in clean-energyprojects creates three to four times more jobs than the sameexpenditure on the oil industry. The Pew Environment Groupfound that green jobs in the United States grew 9.1 percent from 1998to 2007, compared to overall job growth of just 3.7 percent. What’smore, Kerry-Boxer provides green jobs and worker transition programsfor jobs and education in clean energy, renewable energy, energyefficiency, and climate change adaptation.
Investments in clean-energy jobs and incentives are paying off. The American Recovery and Reinvestment Act included $80 billion for clean-energy initiatives. The process for distributing funding has been lengthy—only 6 percentof Department of Energy funding had been spent at the end of December2009—but ARRA’s clean-energy provisions have already saved or created 63,000 jobs.
Clean-energy and climate legislation will make us more competitive.The United States is losing the clean-energy race. Other countries suchas China are forging ahead with clean-energy policies and investmentsthat are creating jobs and generating industries to help them become “the world’s leading exporter of clean energy technologies.” China is also the second-largest producerof scientific knowledge, right behind the United States. China plans togenerate 15 percent of its energy from renewable sources by 2020. Thecountry is the largest manufacturerof wind turbines, and is poised to be the leading manufacturer of solarpanels. The Chinese are benefiting from an expanding economy and jobgrowth; jobs in Chinese renewable energy industries are growing by 100,000 a year, totaling to 1.12 million in 2008.
Acting now will help our economy. Milken andHeritage do not consider the costs of inaction. The longer we wait tobegin our clean-energy transformation, the further behind ourcompetitors in China and Europe we will be, and the more expensive itwill be to catch up. The majority of 144 economists polled by New YorkUniversity’s Institute for Policy Integrity, or 84 percent, agree thatglobal warming’s effects “create significant risks”to the economy, and 94 percent agree that the United States should joinclimate agreements to limit global warming. The Securities ExchangeCommission said for the first time that companies should disclose to investors the risks that climate change poses to their businesses. The Institute for Policy Integrityat the New York University School of Law found that failing to dealwith climate change will cost our economy an average of $27 million to$375 million every day from now until 2050. This does not include environmental costs or costs to public health.
Image: A U.S. delegate walk past solar panels on display outside aFuture House, a clean-energy resident development project in Beijing,China, on July 16, 2009 in the AP photo.