How a cap and trade bill will affect you
Filed under: Recession, Stimulate US, Green
The main goal of the proposed cap and trade bill is to reduce the level of harmful greenhouse gas emissions. To achieve this objective, Congress has crafted a plan to place a cap (or limit) on the amount of greenhouse gas that can be emitted into the atmosphere by large scale companies. These companies are required to have an emissions permit for each ton of CO2 released.
The bill will also offer trade incentives for companies to reduce emissions below the maximum level they were limited to in the purchased permit. The companies that emit less than required can sell the left over amounts to other companies that cannot meet the reduction limit. The main source of government profit from the cap and trade bill would derive from auctioning off emissions permits.
An additional purpose of this bill is to decrease the demand for "dirty" energy, and instead use profits to stimulate the path towards a "greener" energy market. It's common knowledge that with decreased demand, prices must fall to lure in customers. This rule doesn't apply in the case of cap and trade.
Cap and trade is in fact a tax on emissions. As with any tax imposed on a business, the new expense is offset by a price increase. Thus, energy companies will need to increase their prices to remain stable. The Congressional Budget Office CBO estimates that the extra cost per household will be $175 in 2020. The government has realized this negative affect on consumers, and has added loopholes to the proposed bill. Congress stated that energy rebates and tax credits will be granted to consumers. NY Times Economix blog states that poor households will receive a benefit of $40, while the richest households will have a net cost of $245 per year. (All figures are estimated for the year 2020).
Another strategy to reduce the financial burden of a Cap and Trade tax on energy companies is for the government to simply hand them out for free.
The Economist Magazine stated that up to 80% of these cap and trade permits have been handed out. So, does your small Midwestern energy company receive a free permit if you're not part of the Washington elite club? Probably not, because it will not help the Congress campaign for the passing of this bill. The more established companies that support Cap and Trade the better for Washington.
Let's return to the impact on our bottom line. Most of the handouts were given to utility companies that distribute electricity to local areas. The government now hopes that if the bill passes, they will be able to order these companies to keep energy prices low and affordable for consumers.
Supporters of the bill state that the main point is to raise energy prices to shift demand to green energy. My question is how long will it take for this major shift? It seems that we will pay up in the meantime hoping for a price reduction, just as we did in the summer of 2008.
Remember when Nancy Pelosi said that high gas prices will make people greener? I've reached the conclusion that there are too many proposals and promises, and too little money to actually accomplish them.
Reader Comments (Page 1 of 1)
6-28-2009 @ 2:09AM
Gary E. Sattler said...
Damanick, this entire cap and trade strategy is nothing but a big vat of stinking snake oil.
Tell me, how will taxing electricity generation increase consumer demand for "cleaner" electricity???
For crying out loud, every world citizen who isn't a completely apathetic nincompoop already wants their electricity to be generated utilizing the cleanest methods possible! How will imposing a brand new energy tax structure improve that?
And never mind those government provided expense offsets which are supposed to relieve the poor people of the financial burden this boondoggle will impose. We all know that the big guys hand the invoice down to the little guys. In the end, it's always the folks at ground level who pay the heavy bills. Anyone who tells you otherwise is assuming that you are an idiot.
The worst part of this whole fiasco is that the BRIC nations (Brazil, Russia, India, and China) have indicated that they won't sign on to this strategy until after the U.S. does. So, if the legislation would pass here, our growing industrial competitors could just back out, leaving us flopping in the dust. In fact, China has stated outright that it's their position that the American consumer should foot the entire bill for manufacturing emissions.
Here are some additional thoughts on the subject from a Business Week Blog comment section:
"Among the many reasons President Barack Obama and the Democratic majority are so intent on quickly jamming a cap-and-trade system through Congress is because the global warming tide is again shifting."
"New Zealand last year elected a new government, which immediately suspended the country’s weeks-old cap-and-trade program."
"The scientific debate (over man made global warming ) is roaring back to life in Australia, Europe, Japan and even, if less reported, the U.S."
"Oklahoma Sen. Jim Inhofe now counts more than 700 scientists who disagree with the U.N. — 13 times the number who authored the U.N.’s 2007 climate summary for policymakers."
"Dr. Kiminori Itoh, a Japanese environmental physical chemist who contributed to a U.N. climate report, dubs man-made warming 'the worst scientific scandal in history."
"A group of 54 noted physicists, led by Princeton’s Will Happer, is demanding the American Physical Society revise its position that the science is settled. (Both Nature and Science magazines have refused to run the physicists’ open letter.)"
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Without even being a scientist, Damanick, I can tell you that the earth has it's own systems for sequestering, regulating, and releasing atmospheric carbon. It needs little, if any, help from us in doing that.
Yes, air quality is an issue which needs to be addressed, but taking money from the private sector and running it through government channels is no way to accomplish that.
Cap and trade taxation is simply about grabbing financial and economic control. It's not about "saving" your planet. That is why it is structured so that wealthy companies shall be able to buy themselves out from under it's requirements. They won't have to reduce any emissions. They'll just go out and buy sufficient credits to accommodate their waste output. They'll be buying those credits from companies which have actually done something to affect the air quality situation.
Do you know who will be funding those carbon credit purchases? That's right, you and I will!
If cap and trade legislation passes, you and I shall be involuntarily complicit in the madness by default.
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6-28-2009 @ 10:20AM
Fred said...
The problem with Cap&Trade is that assumes 'Global Warming' is real, and that it is man made. Also Shell & Exon are working on prototypes or real 'Carbon Scrubber Machines' which are no doubt ready for rental by so called: 'polluters'. Plant life needs carbon dioxide to grow, in photosynthesis: One acre of corn, growing 100 days, consumes 5,585 pounds of carbon from the atmosphere. Also the average amount of carbon dioxide in the atmosphere is/has been 0.03 percent. If carbon dioxide was not replentished, it would be consumed/gone in about 22 years. All this from my Botany text from the 1970's.
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6-30-2009 @ 2:08PM
URKiddinMee said...
This is the biggest boondoggle ever! Cap & Trade will result in trillions being spent on pseudo-science while algore and Soros make billion$ off of our ignorance! Meanwhile, a few extra million layoffs will ensue. Screw liberals!
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6-28-2009 @ 7:09PM
Will said...
What a SCAM,....all the windmills and solar panels they are going to build won't even power the refrigerators in this country and the tax will just about finish off what few small businesses that will be left when Obama is done killing us off !! Obama will end up driving business out of business or to another country.
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6-29-2009 @ 6:06AM
Arklight said...
Oh, yeah, and the good part was where all these new jobs would be forthcoming in the manufacture and installation of wind and solar generating systems; yeah, in India and China the manufacture will take place because they don't give a damn about greenhouse gasses, and won't have to pass on the carbon tax to their customers. Installation? Well, the illegals work cheap, don't have workmen's comp, and can't complain about long hours with no breaks. What little manufacturing we have left can't compete if they try to pass on the carbon taxes, so they'll fire all the help, close their doors, and we'll get more overpriced crap from China, India and other places which have cheap labor and no carbon taxes. Agriculture will almost vanish, since the farmers cannot afford the carbon taxes which they cannot pass on to anybody - - - another nice move by congress, which has instituted nothing but cluster - - - - - for the last hundred years. There has been nothing - - - NOTHING - - - passed by congress since 1900 that hasn't had the result of utter disaster and devestation for the United States and Americans. Were y'all watching 'Idol' when BO said that his new carbon taxes would put the power companies out of business? You fractured richards make me sick.
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6-29-2009 @ 7:49AM
Elmira NY said...
Let's FIRE this government and start over!
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6-29-2009 @ 7:56AM
Paul Smith said...
Granting that we're going to try cutting energy demand, hoping to conserve resources and cut levels of CO2 in the air--It's gonna happen--Don't get your knickers in a twist over whether it's an over-reaction or not. So the real questions are (1) What's the fastest, most efficient way to get results? (2) Cheapest way for John Q. Public?
The candidate approaches are (1) direct energy taxes or (2) cap and trade. Cap and trade is almost surely what we're going to get, because we don't see the costs coming directly out of our pockets as a tax would do. Easier for politicians to sell--pulling the wool over our eyes.
But we're going to pay, and pay a lot more than with an energy tax; because every penny of cost to big polluters will pass through to consumers, with big, uncontrolled markups that will affect our cost of living more than any tax plan.
Direct energy taxes should win big on all counts; because we'd see the costs, lower costs but up front where we see them and respond far more quickly with conservation measures. And the benefits would be revenue to our treasury, not the billions of bucks shared only by the big polluters under cap-and-trade.
My God, America! Wake up. Cap and trade is an even worse deal than subsidizing ethanol from food crops!
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6-29-2009 @ 9:15AM
Alan said...
What's next....an oxygen inhalation tax?
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6-29-2009 @ 8:34PM
Jason said...
http://www.prisonplanet.com/articles/march2007/140307Breathing.htm
6-29-2009 @ 9:57AM
whoward962 said...
All this is, is another way to tax us so they have more money to spend.
We really need to vote them ALL out of office and send a message that this is our country and that they the politicians work for us.
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7-10-2009 @ 1:21PM
Thor said...
Cap and trade will effectively put an end to this great nation. PERIOD. Pack up the tents-take your ball and go home-last one out turn off the lights-thats all she wrote-stick a fork in it-the fat lady is singing-etc....
Even if global warming wasn't a complete hoax, (which it is) the leaders of the 2 largest rapidly advancing industrial nations will not agree to any climate reform provisions what-so-ever. So in theory, any advancements we could possibly hope to make would be completely obliterated by China and India. Our economy would be devastated and theirs would sky rocket.
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7-31-2009 @ 12:28PM
f schnur said...
We need a sweeping recall election of the whole bunch of
politicians, with O'bama's name at the top of the list. We have a great country. Let's not let these shysters ruin what we have. It's time to take our country back.Wake up and smell the stench.
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9-01-2009 @ 3:33PM
randy said...
I think you people are all stuck in the past, the worlds changing and you better get use to it. It is my opion that you all are afraid of change. I'm telling you that if we don't get on the ball we will be a third world country.
I think theres a hole lot of racism and a lot of misinformed people out there. Read the constitution and then tell me what the president is doing wrong. And most importantly article 1SECTION 8 of the constitution.
Come on people get your heads together if we don't pass health reform we won't be able to afford it. And if you pollute you should pay and don't give that line about plants needing carbon, plants were here long before we were. I can't understand you people quit watching fox news. GO BACK TO SCHOOL AND LEARN A TRADE. You people got to much time on your hands and remember you elected these people into office let them do there jobs.
Once again fox news has brain washed you all, theres alot of money in the health care and there gonna spend a billion to keep it.
Don't cry to when you get sick and go bankrupt.
Section 8 - Powers of Congress
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
Welfare
welfare n. 1. health, happiness, or prosperity; well-being
Randy of MI.
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