Part 3 - "Cap and Trade" 101
by Michael Williams
June 24, 2009
Recently, the U.S. House Energy and Commerce Committee began debating the Waxman-Markey cap and trade bill. The tentacles of the massive 900+ page legislation will reach into every aspect of American life and significantly impact our national economic and energy security.
But according to a recent poll conducted by Rasmussen Reports, only 24% of Americans correctly identified that cap and trade has something to do with the environment. A slightly higher number (29%) believed the proposal has something to do with regulating Wall Street while 17% thought the term applied to health care reform. A plurality (30%) had no idea.
So what is cap and trade?
The Goal
The goal of this legislation is to reduce U.S. CO2 and Greenhouse Gas (GHG) emissions from 2005 levels by 17% by 2020 and 83% by 2050. The U.S. emits about 7 billion metric tons of CO2 annually, which includes the carbon dioxide we emit every time we breathe. If CO2 is reduced 83% by 2050, proponents claim it would reduce the earth’s temperature by 0.07 degrees Celsius by 2050.
The Cap
The federal government will set a limit on the amount of CO2 and GHG that each large-scale emitter, e.g. power plants, refineries, industrial facilities can emit. The firm would be required to get an “emissions permit” for every ton of carbon dioxide it releases into the atmosphere. These permits set an enforceable limit, or cap, on the amount of greenhouse gas pollution that the company is allowed to emit. Over time, the limits get stricter, allowing less and less emissions, until the ultimate reduction goal is reached.
The Trade
Some companies will be unable to meet their emissions limits. They would be allowed to purchase allowances from other companies that have more permits than they need to account for the amount they emit. The cost of these credits would be determined by the marketplace
The "Revenue"
In its budget, the Obama administration said it expects a cap and trade system would raise about $646 billion in the eight years to fiscal year 2019. However, a top White House economic adviser has estimated the revenue to be closer to $1.3 trillion to $1.9 trillion between 2012 and 2019.
The Use
The administration has talked about using the “revenue” for any number of purposes: investing in clean energy technologies; helping some large emitters make the transition; pay for health care reform and paying for the Making Work Pay tax credit.
In short, cap and trade is in upwards of $1.9 trillion put into the hands of government to reduce CO2 emissions; but it won’t accomplish even that. Not with China and India continuing to build more coal-fired power plants. It will raise an average family's annual energy bill by $1,500, and destroy 1-3 million jobs per year, over the next 15 years.
Don't forget to with your friends.
How will "cap and trade" affect your household? Use The Tax Foundation's cap and trade calculator.
Comments
Dennis Deckard Jun 25, 2009
Not only will Cap & Trade be ineffective, it will cost us a fortune and grow Big Gov bureaucracy, too, which will ultimately demand more tax money.
RAS Jun 25, 2009
"Obama's energy policies kills trees in the rain forest in Brazil due to lack of carbon dioxide. Coal plants are given incentives to begin producing energy again to revitalize the world's forests."