NCPA - National Center for Policy Analysis


June 6, 2008

In the era of global warming, there are both good and bad ways of attempting to control greenhouse gas emissions.  One of the bad ways is cap-and-trade, which unfortunately is favored by environmental groups and their political allies, says columnist Robert Samuelson.

The Senate is debating a cap-and-trade proposal, which would decrease carbon-based fuel emissions from coal, oil, and natural gas by making them illegal:

  • These fuels currently provide about 85 percent of U.S. energy needs and generate most greenhouse gases.
  • Companies could emit greenhouse gases only if they had annual "allowances" -- quotas -- issued by the government, which would gradually decline; that's the "cap."
  • Companies (utilities, oil refineries) that needed extra allowances could buy them from companies willing to sell; that's the "trade."

There are numerous problems with this proposed legislation, says Samuelson:

  • Suppressing emissions will also suppress today's energy sources, and since the economy needs energy, this will suppress the economy.
  • From 2006 to 2030, the Energy Administration Information projects the U.S. population will grow by 22 percent (to 366 million); this increase in population will correspond with an increase in the demand for energy.
  • Higher fuel prices will lead to higher energy costs that will not be offset by decreased energy consumption is; in fact, the Congressional Budget Office has estimated that a 15 percent cut of emissions would raise average household energy costs by almost $1,300.
  • If coal-fired power plants are cancelled, wind or nuclear energy cannot automatically substitute; therefore, if the supply of electricity doesn't keep pace with demand, brownouts or blackouts will result.
  • As "allowances" became scarcer, their price would rise and the extra cost would be passed along to American businesses.

Source: Robert Samuelson, "Let's Just Call it 'Cap and Tax,' " NewsWeek, June 9, 2008.

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