This week Governor Gregoire wrote a letter to members of the Washington State Congressional Delegation asking them support pending federal legislation that would establish a cap-and-trade system across the United States.  In her letter she writes:

“The United States cannot afford to wait any longer to take comprehensive action to break our dependence on foreign oil while at the same time seizing the opportunity to develop 21st Century energy technologies, create jobs, reduce greenhouse gas emissions, and arrest global warming.

In the letter, the Governor offers up “examples” and “evidence” for why these policies are necessary.  However, our research and analysis of the cap-and-trade system proposed in the state of Washington and that system’s experience in Europe, demonstrates that many of the claims and arguments that the Governor provides are misleading or not based in the consensus science.

Below are highlights from areas of the Governor’s letter that diverge from accepted experience and are at odds with environmental economics.  In a separate blog posting we will review the scientific divergences made by the Governor.

Claim: “During my time as Governor, I have taken many actions to position our state to be a leader in the new clean energy economy…energy efficiency standards for buildings.”

Response: We have repeatedly highlighted the failure of these “energy efficiency standards for buildings” to save energy. The state Department of Ecology and Superintendent of Public Instruction have both confirmed this. An opinion piece earlier this year from DOE called savings estimates “prema­ture,” and the SPI’s office released a report last December saying that data didn’t show savings. Our research found that schools built using the standards have actually increased energy use by up to 30 percent.

Claim: “Our state’s $21 billion in annual energy expenditures, much of which currently leaves the state, justifies targeted public-sector investment in energy.”

Response: This is a strange claim for the Governor of “the most trade dependent state in the nation.” Imagine if the rest of the world took this attitude to justify refusing to buy Washington products like Boeing airplanes, Washington wine and apples, or Microsoft software.

Following this policy would harm the people of Washington, creat­ing fewer jobs, make us poorer and hurt the environment.

Focusing on what we do best, we create more jobs and more pros­perity because productivity is in­creased. Buying energy, whether it is oil or windmills, from others who produce those cheaply, saves money for Washington consumers, allowing us to invest in other industries and jobs.

This stance also hurts the envi­ronment. McKinsey & Co. note that the least expensive, low-carbon fuel is sugar cane biofuel. The US, however, has trade barri­ers against that energy source to keep biofuel money here. Doing so, however, led us to use fuels like corn-based ethanol and soy-based biodiesel, both of which have been determined to be more environmentally damaging.

“Targeted” investments in bio­fuels and other politically- se­lected technologies have a poor track record and justifying them with bad economics compounds that problem.

Claim: “We naively set a goal in 2007 of 25,000 green collar jobs by 2020. Today, with our robust community and technical college system with programs specifically designed to support more green jobs, we already have more than 47,000.”

Response: The Governor’s use of the word “naively” is interesting. Naïve implies that the state went about set­ting their goals without adequate knowledge or understanding of what a “green collar” job is or how they could be created. Given that naivete, we should wonder if credit is actually due here.

Additionally, these jobs are more theoretical than real. During the time Washington met and sur­passed that “naïve” target, our unemployment rate has nearly doubled. When the Governor signed the “green jobs” Executive Order in February of 2007, the unemployment rate was 4.8 percent, identical to the US rate. After the creation of 39,000 “green” jobs (there were 8,000 in 2007), the unemployment rate has reached 9.2 percent, 0.1 percent higher than the national average.

Claim: “Economists concluded that Washington’s families, businesses and communities are likely to incur billions of dollars of annual economic costs if we fail to drive reductions in climate-changing greenhouse gas pollution. Increased public health expenses alone could account for $1.3 billion a year.”

Response: The Governor references a study released by the University of Oregon. Those numbers are debatable and they ignore the costs of the policy. Washington Policy Center, in partnership with Beacon Hill Insti­tute, provided an economic analysis of the Western Climate Initiative’s cap-and-trade proposal. The key findings of that report found that Washington State could lose: “18,292 net jobs, $5.71 billion in per­sonal income and $302.54 in per capita disposable income” by 2020, with costs continuing to rise after that. If we ignore the costs of the policy we are likely to adopt a cure that is worse than the disease.

Claim: “The final bill must fairly allocate allowances to Washington’s hydroelectric utilities – recognition of our important hydropower base has been a basic tenet of mine for any cap-and-trade program.”

Response: This paragraph is full of irony. First, the Governor has op­posed counting hydropower as “renewable” under state law, but now asks Congress to do exactly that.

Second, the Governor has repeatedly argued that Wash­ington needs to be a leader in reducing CO2 to set the tone for federal policy. Now, however, federal policy is giving the bulk of free permits to emit CO2 to states with historically high emissions. States, like Washington, that showed “leadership” and reduced their emissions will be punished under the new system. Washington led, but nobody followed.

Click here to read the full WPC response to Governor's letter on cap-and-trade