The numbers on the scheme vary but here's one analysis.
In dealing with the perceived problem of CO2 emissions, Congress is considering a cap-and-trade system. A cap-and-trade system called the Climate Security Act that was scuttled last year is on the agenda again this year.
The rationale behind cap-and-trade is that high C02 emissions will cause increasingly severe global warming and we thus should force reductions in the use of the fossil fuels that generate most of the C02 emissions.
Cap-and-trade is basically carbon rationing. Government would decide how much carbon dioxide we as a country would emit in a given year (the cap) and print a number of ration cards. These would be auctioned off and allow companies to buy and sell them (the “trade” part). The idea is the cap would force the U.S. economy to consume a lot less fossil fuel.
There are huge problems with this approach:
The Congressional Budget Office said “Most of the cost of meeting a cap on CO2 emissions would be borne by consumers, who would face persistently higher prices for products such as electricity and gasoline.” The Science Applications International Corp. estimates residential rates would rise between 28 percent and 33 percent by 2020 and between 101 percent and 129 percent by 2030.
In addition, the cap-and-trade bill would raise gas prices at the pump between 41 cents and $1 per gallon by 2030.
The Federal Energy Information Administration said the bill would result in a 9½ percent drop in manufacturing output down the road.
The Obama administration says it would cost ratepayers $650 billion over a 10-year period, but many believe the real number would be between $1 trillion and $2 trillion.
According to the George C. Marshall Institute, the administration’s cap-and-trade plan would create a 3 percent reduction of our gross domestic product in 2015 and a 10 percent reduction in 2050.
Putting a price on CO2 is like a regressive tax because poor and middle-income folks spend proportionately more of their money on such necessities as gasoline, groceries and home heating.
A really great inequity would fall on those parts of the United States that rely most heavily on coal to generate power — the Midwest, South and Plains. Missouri, which gets 81 percent of its electricity from coal-fired plants, would be one of the hardest-hit states.
An additional proposal tied to cap-and-trade is the “renewable portfolio standard,” which would mandate that utilities generate a percentage of their electricity from renewable resources such as wind or solar. Nuclear power does not qualify. The law would also provide subsidies for wind and solar power. Government shouldn’t really be in the business of picking winning and losing technologies. Price signals are always better than planned economies.
Another major problem with cap-and-trade is simple economics: China and India will never endanger their own economic growth and the opportunity to lift their populations out of poverty merely to placate Americans. So investments and jobs would go to nations with lower costs because they do not have climate regimes. We would become much less competitive internationally.