Wrong Again: Business Attacks Climate Security Act

By Daniel J. Weiss | March 13, 2008

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The National Association of Manufacturers and the American Council for Capital Formation today released their latest effort to frighten the American people and their representatives in Congress for acting meaningfully to combat global warming. The NAM/ACCF report, titled “Analysis of The Lieberman-Warner Climate Security Act (S. 2191),” unsurprisingly predicts that the Climate Security Act would lead to higher electric rates, loss of jobs, high allowance prices, and other economic harms. 

This study is nothing more than a bad rerun of long ago predictions about acid rain controls that proved false. Twenty years ago, these same predictions were made by industry and the Environmental Protection Agency about the then controversial proposed acid rain control program. None of these predictions came true. After enactment of the acid rain program in 1990, electricity prices went down (in constant dollars), not up. 

In fact, electricity prices are lower today than they were in 1990, even after implementation of three rounds of controls on sulfur dioxide from power plants. Although there were some coal mining job loses, EPA found that by 2010 “95 percent of the decline [in mining jobs] is expected to be due to productivity gain and only 5 percent of the loss in jobs (4,100) is expected to be attributable to Title IV [acid rain program].”

The acid rain program was the first big cap-and-trade program, and EPA predicted that the price of sulfur allowances would be $750 per ton. Actual price: less than $200 per ton under the original program. Why were these models wrong? Because none of these models can account for innovation spurred by putting a price on pollution emissions that were formally free.  

Once managers and engineers have binding targets and firm deadlines, they are able to meet the standards for much less than the predicted amount. The NAM/ACCF study suffers from the same inherent flaw. It is a static guess about a dynamic and unpredictable economy. The NAM/ACCF study will be as wrong now as the acid rain studies were then.

Daniel J. Weiss is a Senior Fellow and Director of Climate Strategy at the Center for American Progress. To learn more about the Center’s energy proposals please see the Energy and the Environment page of our website.