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The White House continues its aggressive economic stimulus program by issuing ever more stringent controls over energy use, which it claims will bring great benefits to the nation for years. Unfortunately, the benefits are largely illusory and the costs are significant.
Consider one new, relatively small, final regulation just issued that will not take effect until 2016. The Department of Energy’s Energy Conservation Program: Energy Conservation Standards for Standby Mode and Off Mode for Microwave Ovens (10 CFR Parts 429 and 430) claims it will produce, over its 30-year life, 2016 to 2045, benefits of $3.38 billion (using a 3% discount rate) in contrast to a cost to the microwave industry of only $96.6 million. That is, the regulation supposedly produces 35 times more economic benefits than cost.
How is this economic wonder achieved? The cost side is relatively straightforward. Microwave ovens will be more expensive as they are retooled to use less power while sitting unused. DOE estimates manufacturers will lose about 7% of industry net present value due to higher costs and lost sales (the $96.6 million) — a substantial loss.
According to DOE, however, that loss in industry value is swamped by the benefits. Over 30 years, microwave users will use less electricity, so 38.11 million metric tons less of CO2 will be emitted (other emissions will also drop, but that is not where DOE says the money is).
The Social Cost of Carbon (“SCC”) from reduced CO2 emission is worth as much as $3.615 billion (at a minimum, it is $255 million, still much higher than cost). SCC was developed by an “interagency process” that determined that the value of a ton of CO2 should, as of 2013, be somewhere between $12.6 and $119.1 per ton, up substantially from the old 2010 SCC values of only $6.2 to $78.4 per ton.
This regulation drew particular attention as it is apparently the first to employ the new higher value of CO2 emissions. The problem is that the “value” of CO2 non-emissions is not based on anything other than the imagination of bureaucrats. Because there is no market for such emissions, no price exists except in the minds of the central planners who have divined a “price” from speculation. The real and measurable cost will be higher-priced microwaves (which will primarily impact lower-income people) and the attendant higher costs and lower sales incurred by industry.
The 4% Growth Project will continue its exploration of the relationship between energy regulation and economic growth by hosting a major energy conference on September 12, 2013, at the George W. Bush Institute in Dallas, Texas. Stay tuned to www.fourpercentgrowth.org for further details and continuing analysis.
TARIFFIED: Trade Talk with Matthew Rooney
This week, trade relations between the U.S. and India are continuing to escalate. Earlier this month, the U.S. stopped granting India special trade privileges by taking away the Generalized System of Preferences (GSP) program, and India has responded by enforcing more tariffs of its own. The George W. Bush-SMU Economic Growth Initiative Director Matthew Rooney breaks down the trade conflict: For more information on trade groups and the global economy, visit www.bushcenter.org/scorecard.
How Trade Spreads Holiday Cheer
It is projected that the average American household will spend more than $1,000 during the holidays this year.
Deporting Salvadorans May Lead to Economic Decline
We should think carefully about a policy whose major impacts are likely to be reductions in employment and economic activity here at home, and increased instability and lawlessness along our borders.
Bush Institute's Laura Collins Talks Immigration on Good Morning Texas
Last week, Deputy Director of Economic Growth at the George. W. Bush Institute Laura Collins spoke with Good Morning Texas about immigration myths. During the interview, Collins had the opportunity to set the record straight and address common misconceptions about legal immigrants living in America today. The segment was inspired from facts released earlier this fall by the Bush Institute in the third edition of America's Advantage: A Handbook on Immigration and Economic Growth. Watch the full Good Morning Texas interview here.