| by Tom Kuennen UPDATE JUNE 6: Proposed cap-and-trade greenhouse gas legislation is shot down in U.S. Senate via procedural methods, but the measure likely will be revisited in the next Congress, when all current projections indicate Democrats favoring such legislation will have increased their majorities in both houses. More here from Sen. James Inhofe (R-Okla.), ranking member of the Environment and Public Works Committee. June 2008 -- A dramatic plunge in the number of miles driven -- caused by stratospheric prices for gasoline at the pump -- cuts down on excise tax revenues to the Highway Trust Fund. The trust fund already is beleaguered by a gap in the amount authorized in the last year of legislation, and the projected amount available, this before the runup in gas prices. And proposed "greenhouse gas" legislation is making its way through the U.S. Senate, with an onerous "cap-and-trade" mechanism that will amount to even higher taxation for all carbon-sourced energy. Hearings were to begin the first week in June. It all amounts to a "perfect storm" heading toward the U.S. highway industry. The American Automobile Association reported that last Memorial Day weekend, drivers paid an average of $3.23 a gallon for regular gasoline, but that the price rose to a record $3.93 a gallon this Memorial Day weekend. AAA forecast that the number of motorists driving 50 miles or more would drop by 0.9 percent to 37.87 million. AAA’s figures mirror a national trend. On May 23, the U.S. DOT announced that Americans drove less in March 2008, continuing a trend that began last November, according to estimates from the Federal Highway Administration. “That Americans are driving less underscores the challenges facing the Highway Trust Fund and its reliance on the federal gasoline excise tax,” said acting Federal Highway Administrator Jim Ray. The FHWA’s Traffic Volume Trends report, produced monthly since 1942, shows that estimated vehicle miles traveled (VMT) on all U.S. public roads for March 2008 fell 4.3 percent as compared with March 2007 travel. This is the first time estimated March travel on public roads fell since 1979. At 11 billion miles less in March 2008 than in the previous March, this is the sharpest yearly drop for any month in FHWA history. Though February 2008 showed a modest 1 billion mile increase over February 2007, cumulative VMT has fallen by 17.3 billion miles since November 2006. Total VMT in the United States for 2006, the most recent year for which such data are available, topped 3 trillion miles. The estimated data show that VMT on all U.S. public roads have dropped since 2006. The FHWA’s Traffic Monitoring Analysis System (TMAS) computes VMT for all types of motor vehicles (motorcycles, cars, buses and trucks) on the nation’s public roads. These data are collected through over 4,000 automatic traffic recorders operated round-the-clock by state highway agencies. More comprehensive data are published in the FHWA’s Highway Statistics at the end of each year "As motorists reduce their travel in the face of steep fuel prices, revenue to the Highway Trust Fund from the 18.4 cent per gallon federal gasoline tax will also decline, possibly worsening a $3.2 billion shortfall already projected for Oct. 1," reported the American Association of State Highway & Transportation Officials (AASHTO). Meanwhile, the urgency for action by Congress to address the shortfall by June 30 is mounting. Because of the manner in which federal aid is distributed to the states, the $3.2 billion shortfall would require a reduction of four times that magnitude in the federal funding to the states. Unless some action is taken by the Congress, the Federal Highway Administration estimates that beginning Oct. 1, 2008, federal highway funding would drop from $41.2 billion in FY 2008, to only $27.2 billion in FY 2009, a loss of some $14 billion. That reduction would jeopardize some 379,000 jobs nationwide. Transportation advocates had hoped to see a remedy to the shortfall enacted with passage of the reauthorization bill for the Federal Aviation Administration. Senate Finance Committee chairman Max Baucus (D-Mont.) and ranking minority member Charles Grassley (R-Iowa) had included provisions in the finance title to reimburse some $5 billion in funding from the General Fund to the Highway Trust Fund. That bill stalled in the Senate however and appears dead for the year, AASHTO reported. Even as the Highway Trust Fund runs out of money, with revenues declining precipitously due to the high cost of gasoline, and locked into the existing SAFETEA-LU legislation, the Democratic-dominated Senate began debating climate change legislation that would drive up the cost of all carbon-based fuels to unthinkable heights, further dragging down the economy. With bill sponsors confident they have the 60 votes needed to stop a filibuster, the Senate took up proposed legislation Monday, June 2, aimed at reducing by 2050 all U.S. greenhouse gas emissions by up to 66 percent below 2005 levels, through a "cap-and-trade" system. An even more ambitious bill was expected to be proposed in the House, AASHTO reported. In the last week of May, Sen. Barbara Boxer (D-Calif.), chair of the Senate Environment and Public Works Committee, introduced a wide ranging substitute amendment to the America’s Climate Security Act of 2007 authored by Sens. Joseph Lieberman (I-Conn.) and John Warner (R-Va.), AASHTO reported. The amendment included numerous tax benefits and grant funds to offset the economic impact of the bill. How would a "cap-and-trade" system work? As described by the Center for American Progress, each large-scale emitter, or company, will have a limit ("cap") on the amount of greenhouse gas that it can emit. The firm must have an “emissions permit” for every ton of carbon dioxide it releases into the atmosphere. These permits set an enforceable cap on the amount of greenhouse gas pollution that the company is allowed to emit. Over time, the limits become stricter, allowing less and less pollution, until the ultimate reduction goal is met. For some companies it will be relatively cheaper or easier for some companies to reduce their emissions below their required limit than others. Companies which emit less than their allowance can sell ("trade") their extra permits to companies that are not able to make reductions as easily. This system is supposed to guarantee a set level of overall reductions, while rewarding the most efficient companies and ensuring that the cap can be met at the lowest possible cost to the economy. Also, the system imposes a thin veneer of private sector supply-and-demand economics over what actually is a government-enforced transfer of wealth. The net result with be billions of dollars in price increases in the economy, slowing the economy further and resulting in a windfall of cash for the federal government. And the Senate would steer much of that to presumed environmentally sustainable projects. For example, AASHTO reports that Boxer’s substitute amendment to the Lieberman-Warner bill establishes a new set of transportation planning process requirements and requires the approval and certification of the “statewide transportation plan” by the administrator of the U.S. Environmental Protection Agency (EPA) as a condition for using some $171 billion proposed in the bill for transit projects. The revenue would be derived from the auction of emission allowances under the new cap-and-trade approach. Over the same period approximately $8 million would be available for bike and pedestrian projects, as well as other efforts to reduce vehicular demand. Some additional funding, which could be used for intercity passenger rail, transit or other strategies “to promote reductions in vehicle miles traveled” would be available to states “that have led in efforts to reduce greenhouse gas emissions and improve energy efficiency.” The bill has stirred heavy lobbying and ad campaigns by both proponents and opponents. Proponents argue that by charging a fee for emissions, the government would derive an estimated $150 billion of new assets in the first year it takes effect, AASHTO said. By the year 2050, $3 trillion in value would be generated to fund a variety of environmental initiatives. Opponents warn that the bill could be devastating to the economy, placing American industries at a global disadvantage with nations such as China, which are not called upon to restrict emissions. Some studies project that consumers would be hard hit, for example, with gasoline prices increasing by 50 cents per gallon. Impacts on states would also vary, opponents said, with the heaviest toll falling on states reliant on coal-powered electricity plants. And because only developed countries are imposing these programs -- and the fastest growing economies in the world, like China and India, are undeveloped and not imposing greenhouse gas emissions controls -- their greenhouse gas increases will by far swamp any reductions forthcoming from the U.S. or Europe. As a result, despite their enormous cost, the emissions controls imposed through cap-and-trade won't have any affect on presumed climate change. This year, if passed by the Senate, the cap-and-trade bill would be vetoed by President Bush. Instead, knowing that the bill is doomed ahead of time, the Democrats and their Republican allies are undertaking the effort as a "dress rehearsal" for 2009, when the environmental crusaders can look forward to enactment via even higher margins of Democrats in both the House and Senate, and a either a sympathetic Democratic president Obama or Clinton, or Republican President McCain, who also lauds "cap-and-trade" as a means of fighting presumed climate change. Also see our series of a few years ago, PRIMER ON CLIMATE CHANGE. END
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U.S. Senate Committee on Environment and Public Works
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