Is $3.80 gas too low? Washington thinks so

May 29, 2008 12:15 am

The proposed 'Climate Security Act,' scheduled for a June 2 debate, would increase gas costs in the name of fighting global warming.

WASHINGTON--

Millions of vacationers paid record prices for gasoline as they hit the roads on Memorial Day weekend, and only those who've been in the sun too long would like to see prices climb even higher. Yet several members of Congress seem determined to guarantee that they will.

They're trying to pass a bill that would raise pump prices. Why? Because they think it would force people to use less. The America's Climate Security Act, sponsored by Sens. Joseph Lieberman and John Warner, would also increase electricity and natural gas costs, all in the name of supposedly fighting global warming.

The bill, scheduled to be debated in the Senate on June 2, essentially places limits on the amount of gasoline and other fossil fuels Americans can use. The aim is to cut our emissions of carbon dioxide, which is blamed for warming the planet.

Once the provisions take effect in 2012, prices would have to rise to reduce demand and meet these restrictions. The only question is by how much.

A recent study by The Heritage Foundation estimates a cost increase of at least 29 percent by 2030, or $1.10 per gallon based on current gasoline prices. The Environmental Protection Agency is a bit less pessimistic, estimating a price boost of 53 cents per gallon by that year. But others predict an earlier impact--a National Association of Manufacturers study projects as much as $1.07 more per gallon by 2014.

And these estimates are in addition to everything else that may drive prices higher in the years ahead. The impact could be far worse.

Consider Western Europe, which already has similar global-warming measures in place. Fuel there costs more than $8 a gallon, yet even at that level, usage is still rising. As a result, few European Union nations are in compliance with their emissions-reductions targets.

If $8 isn't high enough to reduce emissions there, what will it take here? In truth, nobody knows for sure how much prices would rise here if we adopted the European-style energy regulations in the Lieberman-Warner bill. But if it passes, we'll find out the hard way.

Some might argue that if this bill prevents global-warming-induced catastrophes, then it will be worth it. But there is growing evidence that the warming threat has been exaggerated. Indeed, 2008 is shaping up to be a cooler year than 2007, and some scientists are predicting that this counter-trend will last for a while.

But even assuming the worst-case scenarios of runaway warming, this bill would make little difference. Many other nations, including fast-growing China and India, are doing nothing to reduce their energy use. Thus, any efforts to force Americans to use less energy would be offset by big increases elsewhere. According to Margo Thorning, senior vice president and chief economist of the American Council for Capital Formation, Lieberman-Warner would cut global concentrations of carbon dioxide by only 4 percent below where they would otherwise be by the end of the century. Thus, at most, this bill would reduce the Earth's future temperature by a small fraction of a degree--too little to even verify that it happened.

In other words, America's Climate Security Act promises lots of economic pain for almost no environmental gain.

Congress has been criticized before for making things worse. But taking up a measure that would boost gas prices--only days after the most expensive Memorial Day Weekend ever? That would represent a new low. Or, considering what it would do to gas prices, should we say high?

Ben Lieberman is a senior policy analyst in the Roe Institute for Economic Policy Studies at The Heritage Foundation.