Cap and Trade is Cap and Tax and Tax and Tax

The American Clean Energy and Security Act of 2009, H.R. 2454, better known as cap and trade, passed the House on June 26th. The vote was 219, to 212.

This bill will not become law until it has been voted on by the Senate.

According to the bill, the purpose is to create clean energy jobs, achieve energy independence, reduce global warming pollution, and transition to a clean energy economy.

Interestingly enough, now days, because of our horrible financial troubles, all bills seem to emphasize that jobs will be created. If the economy were good, then the global warming argument would come first, and the job creation may not be mentioned at all.

The purported purpose of the cap and trade bill, which no one denies is a massive tax increase, is to reduce pollutants, by offering financial incentives, and penalties, to polluters. The stated motivation is to reduce global warming by reducing pollution.

Now, regardless of how one feels about the global warming debate, the idea of reducing pollutants is a good endeavor. I come from a pre-pollution-control world where air pollution caused eyes to burn, and it would hurt to breathe, and I can attest to the great success of smog control devices on our automobiles.

It has been expensive. I am sure that smog equipment on our automobiles adds thousands of dollars to the price of a car, plus additional maintenance costs, and, of course, government imposed smog checks. But, it is has been worth it; the quality of my life has been better.

So, cap and trade, on its surface, seems like a great idea.

In twenty-five words, or more, the idea is this:

1) The government sets a cap on the amount of allowable pollutants that a given entity can emit.

For example:

2) Company A, a coal-fired power plant in Iowa,  purchases a permit from the
government  to emit 100 tons of  carbon dioxide (CO2), each year.

2) Company B, a coal-fired power plant in another State, also purchases a permit to emit 100 tons of CO2.

3) Company A invests money in new pollution control equipment, and reduces their CO2 emissions by 40%, or 40 tons; they now have a pollution credit of 40 tons.

4) Company B, on the other hand, is not able to reduce their emissions, and, in fact, their  emissions are 140 tons, instead of 100 tons.

5) So Company B goes to Company A, and purchases 40 tons of emission credits from Company A.

6) Company A is receiving a return on their investment, and Company is being penalized for not investing  in emission control equipment.

It is not clear to me what the penalties are if a company exceeds their emission permits; I assume that there are heavy financial penalties; perhaps fines.

Theoretically, consumers who receive their electricity from Company A, should,
proportionally, have lower  rates than those of Company B.

BUT, the rates will not necessarily be lower because Company A has made an expensive investment in new equipment and technologies, which, as always, means the consumers will pay higher rates.

Quite possibly, Company B consumers could pay less than Company A consumers, because the cost of polluting could be less than the cost of purchasing and installing new equipment.

I am no genius, so I’m sure that our legislators have envisioned the same thing, so I am guessing that  Company B, the polluters, will be subjected to ever increasing caps/fees, until they will need to install new equipment just to survive. (Perhaps they can even be prosecuted).

Either way, Company A, and B, consumers will only see increases in their energy costs. And those costs are more than just their personal energy usage, such as their electrical power, but in all the other items that they consume that require some sort of energy usage (which, is everything). Groceries will cost more, clothes will cost more, housing, transportation, public services, etc, etc. Everything will cost more.



It all sounds fairly simple, on it’s surface. It is clever. But I don’t see how it reduces pollution. In my example, the net change is zero; pollution is neither increased, nor decreased.

The only thing that changes, is that the tax payer, and consumer, have less money in their pockets.

In fairness, the government defined caps are supposed to be lowered as time goes on, and credits can be retired to never be used, again. So an environmentally conscience organization could purchase emission credits, and retire them, effectively reducing the pollution caps, and, therefore, reducing pollution. But, the government could simply issue more pollution credits, effectively raising the caps.

I am not against the idea of controlling pollutants. My understanding is that a major pollutant is carbon-dioxide, or CO2, produced by coal-fired power plants. While we have done a great job of removing visible pollutants from the smokestacks of power plants, the CO2 levels are still there.

CO2 is an invisible pollutant; we all know that humans cannot breathe CO2. It's not difficult for me to support the idea that we need to control the CO2 pollutants. The Earth is very big, but, still it is an enclosed bubble, and it would be illogical to believe that we, as humans, do not have some effect on that bubble. Again, I am from that era where smog hurt, and  we had smog alerts, and were cautioned not to play outside, etc, so it's not a great stretch to believe that we can effect our environment on a global scale.

But cap and trade does nothing to reduce the pollutants. All it does is bring more tax money to the government, at the expense of the individual consumer. It is a tax increase, with no clear benefit, with the Global Warming issue is being used as a scare tactic.

Fear, and crisis, are effective means of gaining the consent of the populace, the government needs voter consent, or apathy, to enact any sort of tax increase.

Our government reduced vehicle emission by passing laws that required automobile manufacturers to solve the emissions problems. And they did, and the consumer paid the cost. And the cost is ongoing, and there is no doubt that the consumer is benefiting from such controls.

But if the principles of this Cap and Trade Bill had been applied to the problem of automobile pollutants, the smog levels would be higher than ever; our eyes would be burning worse than ever, and our breathing would be labored, and painful.

Think about it. Imagine that GM builds a huge family-size SUV that is a gross polluter, and  Ford builds an identical SUV, but  with pollution control equipment. Under a Cap and Trade scenario, GM would simply buy pollution credits from Ford. The total amount of pollution would be unchanged;

The whole idea of ‘reducing’ Global Warming depends on worldwide cooperation; it does not do any good to reduce the pollution in the United States if Mexico, and Canada, and China, and, etc, etc, do not also reduce their pollution.

But, this Bill is about the United States, only, so how in the world can it reduce Global Warming, when most of the rest of the world is doing as they please ?

It just seems like a boondoggle to me, because, in the first place, it’s based on the premise that somehow Global Warming is man-caused, and the further premise that man can mitigate it. There is no consensus, and there is no agreement about Global Warming, yet a majority of our legislators who voted for Cap and Trade ignored that reality, and voted to enact a Bill that has no real purpose other than to generate tax dollars.

Second, I still don’t see where there is a net decrease in pollution.

Third, I just see it as an ingenious way for governments to tax  their citizens, in the name of a good cause, i.e., Global Warming.

If our intent were really to reduce polluting emissions, we could simply tax dirty energy to the point that it will encourage the creation, and development of alternate forms of clean energy.

If we want to have more efficient automobiles, increase the taxes on gas so a that a gallon of gas is over six dollars a gallon. Does anyone doubt that we would have more efficient cars in no time at all ? Heck, the oil companies would investing their own money in developing new technologies.

The taxpayers/consumers will foot the bill, as we always do, but at least the money won’t be wasted on a feel-good thesis that we are saving the world, and we won’t have to run our hard earned money through some inefficient governmental bureaucracies in Washington, who only want their share of the environmental activism pie.

Cap and Trade is a massive tax increase with no clear benefit, and the proponents are taking advantage of the good intentions, and good ideals, of honest American tax payers.

By the way, as I recall, President Obama promised that there would be no new  taxes for any American making under $250,000 ?

I guess promises are just another pollutant that needs to be eliminated.

And that is just my opinion.

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