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Economic Perspective

American Clean Energy and Security Act

by Susan Combs

Comptroller Susan Combs at podiumWith so much of the talk in Washington these days focused on health care and Wall Street regulation, forgetting about a proposal that could profoundly affect Texas is easy to do. But the cap and trade provisions of the American Clean Energy and Security (ACES) Act of 2009, sometimes called Waxman-Markey, will have a significant impact on Texas families, businesses, and consumers.

We have heard many predictions of what impact this bill will have on our families, including the postage stamp per day estimate from the Congressional Budget Office and the $1761 per year estimate from the United States Treasury Department. How can these groups have such different opinions on the impacts of this bill? To answer that question, you have to look at the assumptions behind the estimates.

The Congressional Budget Office looked only at the expected cost in 2020, before most of the costs will occur. And they ignored the damage that higher energy prices will inflict on our economy. The Energy Information Administration assumes that low-emissions technologies, such as nuclear energy, clean coal technology, and renewable sources like solar and wind, will be developed and deployed on a large scale without encountering any major obstacles. Still others argue that we can buy our way out of expensive domestic reductions by paying for international carbon dioxide schemes through “offsets.”

The goal of ACES is to dramatically reduce America’s conventional energy usage. The only realistic way to do this is through higher energy prices. In a 2008 San Francisco Chronicle interview, then Senator Obama said that “under my plan of a cap and trade system, electricity rates would necessarily skyrocket.” Gasoline and natural gas prices will rise as well, along with the prices of many products that depend on reasonably priced energy, including many food items, diapers, cell phones, and lipstick.

“Skyrocketing” energy prices will have a disproportionate affect on the Texas economy. Texas has a high concentration of energy-intensive industries producing products used around the world. These and other factors, such as our climate, make Texas one of the country’s leading energy users. We have successfully diversified our economy, but many Texans still depend on oil and gas for their livelihoods. In 2006, the oil and gas industry contributed $159 billion, or 14.9%, to the Texas Gross State Product.

My office looked at a reasonable prediction of future energy prices under ACES performed by the Charles River Associates for the National Black Chamber of Commerce. Our analysis indicates Texas could lose 170,000 to 425,000 jobs by 2030 as a result of those increased energy prices.

We have made tremendous progress in reducing the pollution from conventional energy. Automobiles, trucks, trains, coal-fired power plants, and natural gas-fired power plants built today all emit a fraction of the smog-forming nitrogen oxides that equipment built just a few years ago emitted.

Texans look to the future and we know we must employ all of our resources to sustain our prosperity and global economic competitiveness as we address environmental concerns. Texas is the nation’s leader in wind energy, with almost three times the megawatts of the next closest state, Iowa. Texas has enormous potential to develop solar, nuclear, biomass and other alternative sources of energy. And to stay competitive, Texas businesses are constantly finding ways to be more energy efficient. As a result, our economy’s energy intensity – a measure of how much energy is used per unit of output – fell by almost 68 percent between 1970 and 2005.

Texas has shown that we can make environmental improvements while remaining economically competitive through innovation and incentive rather than through job-killing regulation. Clean energy jobs can and will be created, but they will not be enough to replace the jobs lost if we rush to pass this legislation without ensuring that its burdens and benefits flow fairly to everyone. We have seen time and again that countries with healthy economies will lead the way toward the clean environment that is everyone’s goal. Let’s make sure the United States remains one of those countries.

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