The reason cap-and-trade and carbon tax have been used interchangeably in the global warming debate is because they are essentially the same thing: a massive tax on energy. Although a more direct approach would be to tax carbon dioxide, it does not make it any more acceptable. But this tax is different because the revenue generated will be given back to the people, presumably.
When has that happened? Can we honestly believe every dollar extracted from Americans from a cap-and-trade or a carbon tax will be given back in the form of a rebate or a tax cut? Obama’s intention in his budget proposal was to recycle the money back to the people. Under the EPA’s section of the budget, about $80 billion per year in energy tax revenues will be dispersed as a tax cut to low- and middle-income workers and used for renewable technology investment, beginning in 2012, if cap-and-trade becomes law. But the Congressional Budget Office estimates that the tax revenues from cap and trade could be much higher – as much as $300 billion per year by 2020. Of course, if the government uses money to invest in green technology, it certainly takes away from the pie that can be redistributed back to the people.
The recent automaker bailout is a pertinent example. When the automakers were struggling, American taxpayers were told it was critical to “invest” in Detroit’s Big Three to turn them around. Despite majority opposition from the American public, the government went forward with it regardless. The White House told Americans the bailout was necessary to keep our economy from plummeting further. Because the loan was supposed to be such a promising investment, taxpayers might even see a return on their forced investment. (Tangentially, these are publicly held companies that any taxpayer can invest in with his or her own money.) Now, the Obama Administration appears about to walk away from $7.5 billion in taxpayer money used to prop up Chrysler. So much for giving the money back to the people.
In fact, here at the Offshore Technology Conference, a number of scientists discussed the causes and consequences of climate change policy. The panel was for the most part balanced although slightly skewed towards global warming alarmism. There was general consensus that the earth was warming; some panelists attributed warming mostly to man while professor Carl Langer argued warming was actually part of the earth’s natural cycle.
Perhaps most interesting, however, were the remarks from Kevin Trenberth, one of the lead authors of the 1995, 2001 and 2007 Intergovernmental Panel on Climate Change (IPCC) Scientific Assessment of Climate Change. He argued global warming was man-made, does pose a significant threat and can lead to more droughts, floods, fires and sea-level rises. Yet, when asked about a cap-and-trade proposal, he was very wary such a proposal would work since it is so vulnerable to corruption and manipulation. He was more adamant about a more transparent carbon tax. But even then he warned that if the revenue collected from a carbon tax were put into a general revenue fund, the American taxpayer would never see it again. Although professor Trenberth’s beliefs about the affects of man-made activities on warming differ greatly from The Heritage Foundation, it was pleasant to see his serious skepticism about the realities of a carbon cap.
And even if Congress implemented a more direct carbon tax (highly unlikely), Americans consumers would still come out as losers. The cost of an energy tax will not outweigh any benefits one expects to receive from the government. Put generically, that’s like hoping at tax time you’ll receive a rebate check from your federal and state governments for the exact amount you paid into the system.
Furthermore, there are certain things a rebate check simply won’t recover. Since 85 percent of our energy demand is met through fossil fuels, increasing the costs of energy will have significant economic consequences. Practically everything we make and do uses energy – predominately fossil fuels. Higher energy prices cause businesses to make production cuts by reducing jobs or taking them overseas. Professor Trenberth suggested something, which encouragingly made a great number of the 300 plus audience cringe, a carbon tariff.
Now not only will energy costs be higher but also we import will be more expensive too. Energy is the lifeblood of our economy, but free trade is one of the fundamental aspects of prosperity, not only in the United States but everywhere. When the United States specializes in the production of certain goods and services they can produce more efficiently, it allows other countries to do the same with other products. The result is lower prices and a higher standard of living for us and our trading partner. Implementing a carbon tariff on top of a cap-and-trade or carbon tax will raise prices on good and lead to retaliatory protectionist policies from other countries. Heritage Senior Trade Policy Analyst explains how free trade actually promotes a cleaner environment here.
The question remains: Do you trust the government to take your money and give it all back to you?