Health Care and Climate change

Using figures derived from a May 2013 Congressional Budget Office report on the economic effects of a carbon tax, an auction price of nearly $60 per ton would boost the price of a gallon of gasoline by 60 cents per gallon and the average price of electricity by about 48 percent. The average household consumes just over 1,000 gallons of gasoline annually. Increasing the price of a gallon of gas from the current average of $3.20 to $3.80 would raise household gasoline expenditures by $600 per year. Similarly, average annual household electric bills more rise by more than $600.

Auctioning off emissions permits was not enough. The original Obama Climate Plan would have required that the United States obtain 25 percent of its electricity from renewable energy sources—wind, solar, geothermal, and so on—by 2025. Nuclear and natural gas were not mentioned. As it happens, in 2012, solar, geothermal, and wind energy generated 0.11, 0.41, and 3.46 percent respectively of electric power in the United States. A recent Information Technology and Innovation Foundation study estimated that replacing all U.S. fossil fuel power by 2030 would cost each American household nearly $5,700 per year. Extrapolating from that, the earlier Obama electric power renewable fuel mandate would result in an increase in household electricity costs on the neighborhood of $570 per year.

In his Georgetown speech, the president scaled back his renewable energy mandate to doubling production by 2020, which would mean that solar, geothermal, and wind would produce 0.2, 0.8, and 7 percent respectively of America’s electric power by then.

An analysis by the market-oriented Manhattan Institute compared the price trends of electricity between coal-dependent states that have adopted renewable fuel mandates of the sort that the president favors and those that did not. The study found that between 2001 and 2010, residential electricity rates had increased by an average of 54.2 percent in the states with mandates, more than twice the increase seen in comparable states without a renewable fuel requirement.

The Georgetown speech also included a reference to the EPA’s new automobile fuel economy standards (CAFE): “We doubled the mileage our cars will get on a gallon of gas by the middle of the next decade.” Estimates by the National Automobile Dealers Association found that the new CAFE standards will boost the average price of a car by $3,000. Proponents correctly counter that that additional cost will be offset in extra fuel savings. On the other hand, a 2012 analysis by scholars at Massachusetts Institute of Technology found that setting automobile fuel economy standards is at least six to 14 times as costly to the economy as a gasoline tax that achieves the same cumulative carbon dioxide reduction. Technology mandates are a very expensive way to cut carbon dioxide emissions.

I say all this not to suggest that we should do nothing to address the possibility of a climate catastrophe. I say it because the Obamacare fiasco should be a warning to the president and other policymakers that a comparable ClimateCare program of top-down centralized planning will miscarry just as spectacularly. Wrecking both the health care and the energy sectors is hardly the kind of legacy a president should want to leave.