Mike Huebsch writes: Global Warming Bill's Flawed Assumptions Will Cost Wisconsin Jobs

Governor Doyle sent three of his top appointees to the Capitol this week to defend his Global Warming Bill.  Among them was Secretary of Commerce Dick Leinenkugel who echoed the governor’s claim about 15,000 new jobs during the first hearing at which the Assembly Special Committee on Clean Energy Jobs accepted public testimony.

The secretary’s comments were followed by Wisconsin employers who said policies in the bill – most notably the requirement that 25% of electricity consumed be generated from renewable sources by 2025 - will increase energy prices and force them to scale back operations and cut jobs.  Wisconsin-based businesses, both big and small, have been sounding the alarm since December. But, our state’s top economic development officer didn’t refute their arguments.  In fact, he didn’t even acknowledge them.

Relying on a report released by the Wisconsin Office of Energy Independence, Secretary Leinenkugel promised that the bill will “accelerate the state’s green economy and create jobs.”  The office, which was established by Governor Doyle in 2007 and is attached to the Department of Administration, is the source of the job creation numbers touted by Madison Democrats.

At the root of the estimate are two flawed assumptions – a carbon tax and unprecedented reductions in energy usage - that conjure 15,000 new jobs out of a $16 billion increase in electric bills.  In reality, the new mandates will cost Wisconsin jobs; 43,000 of them according to the only independent cost-benefit analysis conducted to date.  Even if the Doyle Administration’s assumptions were reasonable – which they aren’t - the price tag would be an astronomical $1.06 million per job.

Governor Doyle’s Office of Energy Independence claims that a $20 per ton carbon tax means renewable power generated by new facilities in Wisconsin or other states under the 25 by 25 mandate will be competitively priced.  In truth, a carbon tax does not exist; not in Wisconsin and not in Washington, D.C.

The report indicated that even if a tax isn’t imposed, a federal cap and trade law or other emissions standards will increase the cost of fossil-fuel generation by $20 per ton.  Even with the unanimous support of Wisconsin's Congressional Democrats last year, the federal Cap-and-Trade (long-ago dubbed Cap-and-Tax) scheme is all but dead and Wisconsin’s own junior Senator, Russ Feingold, had a hand in its demise.  What’s more is that bipartisan opposition is standing in the way of a U.S. Environmental Protection Agency (EPA) plan to establish new economically devastating regulations for greenhouse gas emissions.

There’s no basis for the assumption that a $20 per ton carbon tax will affect energy prices in Wisconsin.  But, if the cost of coal isn’t artificially inflated, more expensive and less efficient renewable sources can’t compete with this reliable and affordable energy source.

All that being said, the Office of Energy Independence acknowledges that electric rates will rise under the governor’s bill.  Secretary Leinenkugel told the committee not to worry because monthly bills will still go down as consumers use less energy.  According to the report he’s betting the economic well-being of our families on, electricity consumption will drop 2% annually, something that hasn’t happened in our country’s post-WWII history.  Wisconsin has come close twice, once during the 1982 recession and again in 2001.  It’s possible our negative numbers in 2009 reached 2%, but if so, it’s being driven by factory closings and job losses and it’s certainly not cause of celebration. Bringing new manufacturing facilities on-line and creating new jobs will mean using more energy, not less.

The only business representatives who testified in favor of the Global Warming Bill this week were those who expect to benefit from subsidies paid by electric consumers.  For main street merchants and run-of-the-mill small businesses like grocery stores, it’s all cost and no benefit.  Wisconsin’s Independent Business Association is opposing the bill because of the anticipated job losses and increased energy prices.  The Wisconsin Grocers Association said the bill fails to take into consideration the impact on retail businesses.  The group explains that utility bills are one of the highest costs for grocery stores and the proposals in the bill will only increase those costs, not decrease them.

Governor Doyle and Madison Democrats shrug off the concerns of these small business owners because while they provide jobs, they don’t provide the right kind of “green jobs.”  For them, a subsidized temporary “green job” is preferable to the job you have today.  According to the Office of Energy Independence report, at least 12,000 of the 15,000 jobs they say will be created by 2025 are construction-related.  The report anticipates only 2,000 manufacturing jobs once the policies are fully implemented.  In other words, at least 87% of these “green jobs” will come and go long before we reach the milestone year of 2025.

NewPage Corporation made news in 2008 when the recession forced the closure of two of its Wisconsin paper mills in Kimberly and Niagara.  NewPage is the largest coated paper manufacturer in North America and it owns 12 mills, six in Wisconsin alone.  Unfortunately, only four Wisconsin mills are still operating.  In 2000, NewPage (then Consolidated Papers) employed 4,315 Wisconsin workers.  Today, it employs only 2,300.

NewPage’s Director of Energy Services, Tom Scharff, served on the Governor’s Global Warming Task Force but voted against the recommendations since they weren’t preceded by a cost-benefit analysis.  Energy is the third highest cost of manufacturing paper behind fiber and labor.  With NewPage’s monthly electric bill for its central Wisconsin mills exceeding $6 million, Mr. Scharff couldn’t vote for a proposal that will increase the cost of energy without knowing the particulars of that increase.  Indeed, even with the particulars, his vote would most likely still be “no.”  In 2000, NewPage paid an average of 3.4 cents per kwh for electricity, but by last year it was paying a whopping 70% more or 5.8 cents per kwh.  Even higher prices caused by the governor’s bill would further jeopardize NewPage’s Wisconsin operations and the two thousand plus jobs families are relying on today.

Manufacturing accounts for a 20.3% share of Wisconsin’s economy, making us the most manufacturing-intensive economy in the nation.  Manufacturing jobs pay $62,959 on average, 37% higher than our state’s average annual salary of $45,905.  Unfortunately, we’ve lost 63,200 of these jobs since the recession began.  Of the 176,000 Wisconsin jobs lost during that time, more than 1/3 were manufacturing jobs.  As bad as those numbers are, they will be far worse if the governor’s bill becomes law.   Because manufacturing is energy intensive, the price hikes under the bill mean this sector will bear the brunt of the 43,000 jobs that are lost.  According to estimates, the paper industry alone with lose 1,934 jobs.

It’s time for Governor Doyle and the bill’s lead authors, Rep. Spencer Black (D-Madison) and Sen. Mark Miller (D-Monona), to heed the warnings of the employers who will pay for their so-called green economy instead of those who will pocket the subsidies.  If they don’t do so soon, you will pay for it on your electric bill or, even worse, with your job.