Truth found in ‘cap-and-tax’ criticism

Published 1:00 am Monday, April 27, 2009

By By Tray Smith
President Obama has proposed a plan to reduce emissions of carbon dioxide and other pollutants believed to contribute to global warming. The proposal is referred to as “cap-and-trade,” but opponents have come to call it “cap-and-tax.” There is truth in that criticism.
Many scientists still doubt whether global warming is a man-made phenomenon, although environmentalists refuse to admit there is a legitimate possibility climate change is mostly a result of natural cycles instead of human activity. Still, assuming environmentalists are right and the health of the planet demands a drastic reduction in the amount of greenhouse gases released into the atmosphere, there are better alternatives to the president’s plan.
Greenhouse gases, primarily methane and carbon dioxide, are released routinely from coal plants, chemical facilities and automobiles. Every time a person runs to the drug store, takes a hot shower or heats their house, he or she is likely causing the emission of greenhouse gases.
Cap-and-trade attempts to lessen that behavior by establishing a limit on the amount of such gases that can be released.
The goal is to set annual emissions below what the environment can absorb without causing a corresponding increase in temperature. In order to accomplish that goal, government agencies would have to monitor how much energy is consumed by every home and business in America and then determine how much gas is released as a result of that consumption.
The thought of having bureaucrats analyzing carbon emissions induces nightmares from business owners already constrained by the vast web of government regulations currently in place. The Obama plan is especially worrying.
Whereas previous proposals would have reduced carbon dioxide emissions by forcing businesses to bid on the right to release such gases, the president’s proposal would sell credits directly from the government. Under previous proposals, the market itself would have determined the value of emitting carbon dioxide through an open bidding process. Eventually, as the number of credits was reduced, the cost of releasing such gases would become so prohibitive companies would have to upgrade and use clean technology. Meanwhile, companies would pass the cost of buying credits onto consumers in the form of higher utility bills, which would incentivize families to reduce their electrical use.
Having the government instead sell the credits directly means the market would not determine the value of releasing greenhouse gasses; the government would. Obama would then let the government pocket that money to bankroll other social programs like universal health care, education and tax credits for the poor. Some of the money would also finance renewable energy research. Overtime, the government would become dependent on this revenue stream to fund its programs. The cap-and-trade system would thus have to serve two mutually exclusive goals.
The first goal would be to limit the use of carbon dioxide. However, as companies respond to the increased cost of carbon dioxide emissions by upgrading to cleaner technology, the second goal of providing revenue for the government would become impossible to meet. As companies stop releasing carbon, they would have no need to buy credits for such releases. Therefore, the government would have no income from those credits to fund the programs it establishes with that money. A fiscal black hole would develop when the government is forced to foot the bill for initiatives that will continue long after the revenue stream that supports them dries up.
Tray Smith is a former page in the U.S. House of Representatives. He can be reached at His column appears weekly.

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