Window Dressing Cap and Trade Won’t Make the Costs Go Away

Nicolas Loris /

Last year Senators John Kerry (D-MA) and Barbara Boxer (D-CA) rolled out a companion cap and trade bill to the Waxman-Markey version that passed in the House of Representatives. Boxer-Kerry was essentially dead on arrival so Senator Kerry went back to work, this time with Senators Joe Lieberman (D-CT) and Lindsey Graham (R-SC). Although Senator Graham is urging his colleagues to slow down, Senators Kerry and Lieberman are trudging forward and have introduced the American Power Act – the latest big climate change bill. Subtitled, “A New Start for Clean American Power and a New Economy,” this bill fails when it comes to energy production and job creation. APA is a new climate bill that tells the same old story: corporate handouts that raise energy prices for years to come.

John Kerry made his sales pitch in The Hill today saying, “There’s a reason why people and American businesses that have always opposed and fought against previous legislation – quite successfully! – are standing behind this one.” It’s because they were offered a seat at the table leaving the rest of America to pick up the tab. Take the words of one major electricity CEO who said, “We don’t flinch from the charge that, yes, some of our motivation and enthusiasm comes from the fact that we should make money on it if it happens.” As the Competitive Enterprise Institute’s Chris Horner stresses, the handouts will go to the businesses that won the lobbying battle while the costs will be passed onto the consumer. It’s no surprise “influence spending” is up 25 percent for the first quarter of 2010 compared to last year.

Other sections of the bill attempt to win support but are nothing more than gimmicks. Farmers, for example, are exempt from CO2 reductions requirement and have the potential to earn revenue through a domestic carbon offset program where farmers can use cleaner technology, use cleaner insecticides, or even not grow crops. In other words, farmers will be paid to reduce their emissions. But carbon offsets won’t compensate for the lost income farmers incur because of higher energy prices. Farmers use a lot of electricity, a lot of diesel fuel, and a lot of natural gas-derived chemicals and fertilizers to grow crops and maintain their farms. The result could be income losses in the billions. This is merely one section in a nearly 1000-page bill that grants the government more control over our economy and aims to protect certain groups at the expense of others.

For all the Americans who didn’t have a seat at the table, the story is not as glamorous. This is a significant tax on energy that will reduce Americans’ income and destroy jobs. Neither cap and trade nor any of its variations can protect consumers. The whole reason for a cap and trade system is to drive up energy prices high enough for people to use less. Despite claims that consumers will eventually save money and that the will be rebated back to the consumer, the net effect is that consumers still pay more for energy and income and savings will fall. In spite of the best attempts by households and businesses to adjust to CO2 caps, the ensuing higher energy costs impose extraordinary losses on the economy. Even a recent analysis from the Congressional Budget Office shows net job losses from carbon capping policies.

And what’s it all for? Climatologist Chip Knappenberger modeled the environmental benefits and found, “The global temperature “savings” of the Kerry-Lieberman bill is astoundingly small—0.043°C (0.077°F) by 2050 and 0.111°C (0.200°F) by 2100. In other words, by century’s end, reducing U.S. greenhouse gas emissions by 83% will only result in global temperatures being one-fifth of one degree Fahrenheit less than they would otherwise be. That is a scientifically meaningless reduction.”

This is not a jobs bill, nor is it an economic stimulus or a pollution reduction bill. Dress it up however you’d like. It’s still an energy tax that will inflict significant damage on the American economy.