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Looking Back: How Lobbying Impacted U.S. Climate Legislation

Written by: Katie Parrish

As presidential campaigns and our climate heat up, many candidates are thinking through their legislative approach to the principles laid out in the Green New Deal. Several presidential candidates have recently rolled out climate plans, including this week’s announcements from Senator Warren and former Vice President Biden. A forthcoming Weekly Energy Economics Briefing will examine the details of the presidential candidates’ plans. But first, it’s worth looking at some recent research on how lobbying dollars have influenced climate policy in the U.S.

Examining the stalled 2009 federal climate bill

In 2009, there was public support for a bill co-sponsored by former Rep. Waxman (D-CA) and Rep. Markey (D-MA), called the American Clean Energy and Security Act. The bill passed the U.S. House of Representatives by a vote of 219-212, but it was never brought Senate floor for a discussion or vote. 

Last week, economists Kyle Meng and Ashwin Rode published The Social Cost of Lobbying Over Climate Policy in Nature Climate Change. In it, they argue that lobbyists successfully thwarted the Waxman-Markey climate bill and, in turn, contributed to an economic loss of $60 billion (in 2018 dollars).

Meng and Rode’s study found that lobbying outlays, both for and against the Waxman-Markey bill, totaled $700 million. The researchers laid out an empirical analysis, which indicates that lobbying efforts lowered the probability that the bill would pass both chambers from 55% to 42%.

It’s worth noting that beyond lobby dollars, many other legislative priorities arose during the Waxman-Markey debate. The financial crisis led to a cumulative 4.0% drop in GDP, the unemployment rate rose to over 10%, and the banking system fell in on itself, causing seize-up in capital markets with many families losing homes and savings accounts. Moreover, 20 million people lived without adequate access to healthcare, positioning healthcare reform as a top legislative priority.

Meng and Rode also found that failure of the Waxman-Markey climate bill came at a cost to everyday Americans: $60 billion in climate damages, based on conventional estimates of the social cost of carbon pollution. Most scientists agree that the social benefits of mitigating climate change exceed the costs of actions to address climate change — from improved public health to avoiding the losses of volatile weather events like wildfires and floods, as well as protecting communities from rising sea levels and ensuring reliable and productive agricultural system.

Can federal climate policy overcome the free rider problem?

When it comes to cleaning up our water and air, we can easily “free ride” and benefit from other’s efforts to reduce carbon emissions while taking no action ourselves. Our climate is a public good, and as the theory goes, the incentives to fix it are faint signals for many in society; it is one of the reasons we don’t see enough people or companies hustling to limit their CO2 emissions from transportation, or conserving energy use by limiting air conditioning in the summer or heating in the winter. It has also meant that many lawmakers are not in a rush to address the severity of climate change.

Since the Waxman-Markey climate bill’s defeat, we have learned more about the science and costs of climate change. The market forces underpinning clean energy are becoming tailwinds that increasingly make wind and solar the more affordable energy options. Moreover, battery costs for electric vehicles (EVs) continue to fall and are projected to make EVs more cost-competitive with conventional vehicles in the next 3-5 years. When coupled with exciting developments in vehicle automation, EVs are disrupting business-as-usual and providing new opportunities to decarbonize the transportation sector— the largest source of greenhouse gas emissions in the U.S.

But will these new market forces quell the impact of lobbying on climate legislation?

Meng and Rode’s study contains good advice for candidates as they look to gain support for their climate proposals. One example: the Waxman-Markey climate bill included a cap and trade program for emissions with initial free permits distributed to companies. Meng and Rode’s analysis showed that if they had allocated more free permits to companies, they would have increased the likelihood that the bill would pass.

Additional suggestions from the researchers: (1) find the areas where you can enhance policy by focusing on the creative engines in the private sector, (2) understand that companies will launch and grow if you give them a helping hand, and (3) foster a business landscape where the desired outcomes of environmental justice and a carbon-free economy are incentivized.