Waxman-Markey Bill: Most Expensive Thing to Hit Economy Since Financial Crisis Began

The so-called Waxman-Markey bill snaking its way through the greasy halls of Congress looks likes the most expensive thing to hit the economy since the financial crisis began. Even the normally mild- mannered Wall Street Journal called it “one of the most ambitious efforts to re-engineer American social and economic behavior in decades, presenting risks and opportunities for a wide array of businesses from Silicon Valley to the coal fields of the Appalachians.”

First off, the stated objective of cutting carbon emissions by 83% by 2050 will go down in history as outrageous – akin to when Who drummer Keith Moon drove his Lincoln Continental into the pool at the Holiday Inn. I think members of Congress must be smoking the same thing Moon was.

To show you how patently ridiculous such a goal is, I turn to Questar’s CEO – a man with the unfortunate name of Keith Rattie. Questar is an oil and gas company. Rattie is an engineer. He has been in the business since the 1970s. He walks us through the basic math in a speech he made at Utah Valley University on April 2 called “Energy Myths and Realities.” Rattie uses Utah as an example:

“Utah’s carbon footprint today is about 66 million tons per year. Our population is 2.6 million. You divide those two numbers and the average Utahan today has a carbon footprint of about 25 tons per year. An 80% reduction in Utah’s carbon footprint by 2050 implies 66 million tons today to about 13 million tons per year by 2050. If Utah’s population continues to grow at 2% per year, by 2050, there will be about 6 million people living in our state. So 13 million tons divided by 6 million people equals 2.2 tons per person per year.

“Question: When was the last time Utah’s carbon footprint was as low as 2.2 tons per person? Answer: Not since Brigham Young and the Mormon pioneers first entered the Wasatch Valley and declared, ‘This is the place.'”

You can extend this math over the whole country – a growing mass of 300 million people. To meet the Waxman-Markey bill’s goals would mean we have to go back to a carbon footprint about as big as the Pilgrims’ at Plymouth Rock circa 1620.

So I think the bill is absurd. I think it is also a great blow to what is left of American industry. But who cares what I think? As the great Jeffers wrote, “Be angry at the sun for setting/ If these things anger you.” This is the way the world works. Politicians do dumb things. We have to play the ball where it is. And that means we have to figure out who wins and who loses.

Here are some thoughts along those lines…

Agriculture. Agriculture, for whatever reasons, is exempt from the new rules. So farmers don’t have to worry about those manure pools out back or the flatulent cows emitting methane all over God’s green meadows. Those big tractors? Burn up that diesel!

Agriculture is a winner by virtue of not losing, like a hockey team that skates to a tie.

Steel. Big loser. U.S Steel, AK Steel and even foreign steel companies with US operations all get a big kick in the family jewels on this one. Steelmaking emits all kinds of carbon dioxide. The worst-case scenario here is that the US simply won’t be making steel at some point in the future. The plants will all go to Brazil. China is already the biggest steel producer in the world. Now we just handed the country a bunch of new business.

Avoid big steel in the US.

Utilities. Mostly losers. Under the bill, utilities will have to get 12% of their electricity from renewable sources. That means they are going to spend money buying windmills and solar panels. For some of the coal utilities, this is bad news – even though they caught a break when the government made a change to let coal have carbon permits for free to start off with. Gas utilities are better off, as they emit less carbon, but since coal gets some free carbon allowances upfront, their advantage will not be as big as I made out in my letter to you a month ago. (See, the problem with writing about potential legislation is the rules change every week.)

Still, I’d avoid coal producers or coal utilities. They wear big targets on their backs and can’t do much about it, except spend a lot of money. Bad for shareholders. There may be some very good ideas on the picks-and-shovel angle for coal, though. For example, a number of companies will sell equipment to clean up coal. And of course, the solar and wind guys are big winners.

Oil refiners. Losers. This is an industry in which it is hard to make money most of the time as it is. Now, under the new bill, refineries are really screwed. Basically, they are on the hook for about 44% of US carbon emissions. They would be among the biggest buyers of carbon emission allowances. I think with one stroke of the pen, the US government just made the US refining industry that much smaller. Lots of these older refineries will just have to close. US imports for gasoline will rise.

I think the refinery industry already sees the writing on the wall. This is one reason why Valero, the biggest US refinery, has been quick to get into the politically favored ethanol business. It’s also expanding overseas.

Avoid the refineries.

Trading desks. Winners. It figures. As if the government doesn’t help financial firms enough, it is going to hand them a nice tomato in trading carbon credits. The head of Morgan Stanley’s US emission trading desk said: “Carbon, while relatively small, is a critical piece of our commodities offering.” So some financial firms with trading desks in carbon get a nice little payday.

To sum up, this is only the beginning. At the end of the day, this obsession with carbon footprints means that Americans are going to have to pay a lot more for products that use fossil fuels. It means we are going to pay a lot more for energy. Obama and his crew can draw up whatever fantasies they want, but they can’t repeal the laws of economics, which, like forces of nature, win out every time.


Chris Mayer
for Markets and Money

Chris Mayer
Chris Mayer is a veteran of the banking industry, specifically in the area of corporate lending. A financial writer since 1998, Mr. Mayer's essays have appeared in a wide variety of publications, from the Mises.org Daily Article series to here in Markets and Money. He is the editor of Mayer's Special Situations and Capital and Crisis - formerly the Fleet Street Letter.

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13 Comments on "Waxman-Markey Bill: Most Expensive Thing to Hit Economy Since Financial Crisis Began"

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So what’s the alternative, genius? That the icecaps melt, and every coastal city in the world drowns? How much will that cost?

You can’t repeal the laws of physics.


Sigh, why does it feel more and more like Atlas Shrugged every day.


KFA – you took the words right out of my mouth.

Jon Bain

kfa, ange, those were my words!
word thiefs!


the real trick seems to be how to suck greenhouse gases back out of the atmosphere and convert to some benign form – the means biological presumably


I am really getting sick and tired of the DR’s egregious show of ignorance on anything climate change.

This article is replete with such examples of this ignorance but worse of tired and worn delayer and denier tactics to try and avoid changing.

This is happening. Deal with it. The sooner you do that, the sooner you can profit from it. And save the world.

No healthy planet = no business.

Jeez, this is grade 2 logic, seriously.

Tim M | Australia



I agree – the worst sort of right-wing ideological idiocy.

rick e
Listen I believe something should be done about climate change However replacing coal with gas for substations = the same Methane gas is still toxic by how much you say. Battery cars you say, yes plug them in when you get home =still using substations How about nuclear power stations that’s it pass the buck I’m sure some one in the future can figure out how to get rid of it safely Yes you say at least we are doing some thing. For years now We can go to mars We can do micro surgery We build nuclear bombs since… Read more »

CO2 is not causing global warming.

Nic Meredith
Water – not air – holds the vast balance of heat on this planet. I go to bed with a hot water bottle filled with hot water – not hot co2. On a hot day, the water at the beach is colder than the air ……..on a cold day, warmer and the water steams. This is a water planet. Average humidity means that there is 10 feet of water in the air above our heads. CO2 is only a trace gas. The heat flows in the oceans drive climate, for example El nino, La Nina or north Atlantic currents making… Read more »
Global warming is very complex (or Climate Change.. which saves face in case global warming doesn’t turn out to be as big as it is touted). We are not an isolated system, and the Earth’s temperature is influenced by incident radiation (solar activity) and geothermal activity. In the middle there is the atmosphere which has a comparatively low heat capacity. Why people think that CO2 is the be-all and end-all of temperature shifts is beyond me, but it’s a very simplistic view. People worship science as a source of indisputable truth, but it’s only when you start applying it yourself… Read more »
Biker Pete
Riding around the world, we take a break at _every_ glacier. The most interesting are those which have years (like 1832) signposted on the roadside kilometres before you reach the glacier, showing where the glacier was 180 or so years ago. As you approach the glacier(s) it’s obviously that ‘the melt’ is progressing infinitely more quickly than in the past century or even decade. On our own property, our creek, which experienced a dry spell for a month or two twenty years ago, is now bone dry for five months of the year. My father’s thirty years of daily weather… Read more »

Nice post Nic M. and a very plausible, if not believable, explanation of how our climate works. It’s idiots like Tim M. in Australia that allow the tax & spend politcos into office where they can legislate us all into poverty and back to the farm. These power hungry elitist need the ‘Tim M. from Australias’ of the world because they’re such damn gullible, tree hugging idiots.

Buy a Prius. More gas for me!

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