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Addicting the U.S. to CO2 Cap and Trade

With little fanfare, President Obama is sneaking carbon emission trading in the back door: he’s planning to addict the US to revenues generated by selling carbon permits to fund his expanded healthcare, environmental, and educational agendas.

According to the New York Times:

His administration will attempt to close the large fiscal gap even while starting a major health-care initiative meant to substantially extend coverage; to do so, it foresees increasing taxes on the wealthiest Americans and using revenues from a new program: selling carbon credits to manufacturers as part of a cap-and-trade plan meant to slow climate change.

Now we have a time-line. Elsewhere in the Times, it is reported that:

… the 2012 projections include revenues from a source that does not yet exist: a carbon dioxide cap-and-trade system. For that to happen, one has to assume passage of a cap-and-trade bill no later than 2010, unless Obama and the Congress intend to let EPA twist the Clean Air Act into a pretzel, giving them the power to impose a cap-and-trade scheme by fiat, which, as I wrote here is a distinct possibility given EPA’s recent moves.

And we have an estimate of how much industry will shell out. Another Washington Post article cited testimony to Congress in September by Peter Orszag, currently Obama’s budget director, estimating that revenue from a cap-and-trade scheme could reach 112 billion dollars by 2012. According to Orszag, who at the time was director of the Congressional Budget Office, the program — which would force companies to buy permits if they exceed pollution emission limits — could generate between 50 and 300 billion dollars a year by 2020.

You can imagine the rhetoric now, if Republicans object, they’ll be the ones throwing future budgets into deficit, by denying those new carbon revenues!

It looks like we’re in for the world of Goretopia with the whole megilla: cap-and-trade combined with a draconian regulatory regime. Look for more gasoline taxes next. Remember Gore’s call for a “wrenching transformation” of society? This is what it is looks like.

4 comments

1 Ed Reid { 02.27.09 at 8:31 am }

The giddily anticipated tax revenues are merely the tip of the iceberg; plus, they would never be realized at the projected levels.

The investment required to achieve “80% by 2050″ is approximately $700 billion per year over the period, using currently available technology. Absent global agreement to “80% by 2050″, much of that investment on the part of manufacturers might well occur in the developing world, which appears far less likely to agree to, no less accomplish, such drastic reductions.

The early pressure in the US economy will likely be concentrated on the electric utilities. Manufacturers, by switching to electric processes from direct-fired processes, where feasible and economically practical, can shift their compliance requirements to their electricity suppliers. Manufacturers can also shift production offshore. The electric utilities have nowhere to go; and, they have the obligation to serve.

The utilities, while they have the potential to influence industrial customer decisions, have no control over them. This will make capacity planning difficult, since a high level of energy source shifting would increase demand and risk shortages, while a high level of industrial customer offshore relocation would reduce demand.

However, while we know the “wish” (“80% by 2050), there is no plan, so there is no goal. (“A goal without a plan is just a wish.”, Antoine de St. Exupery

2 Ralph Hansen { 02.27.09 at 1:15 pm }

The real motive behind the Democrats’ global warming agenda is becoming increasingly apparent – it has nothing to do with environmental protection and is all about government spending and redistribution of wealth. Their pleas about the need to “save the planet” are obviously disingenuous in the face of cooling planetary temperatures and the explosive growth of coal use in China, India and other parts of the developing world. Barbara Boxer and her ilk who speak of restoring respect for science in the debate demonstrate their hypocrisy by continuing to ignore evidence from researchers like Roy Spencer and John Christy who have demonstrated the earth is largely insensitive to increasing concentrations of CO2 in the atmosphere.

Our so-called leaders view climate legislation as yet another cash cow to fund their pet projects, and completely disregard the decidedly negative impact it will have on the US economy, global competitiveness, and most frightening, the wealth upon which America depends to protect its national security.

The expanded liberal majorities brought about by the 2008 Election have unleashed a tidal wave of collective socialist insanity upon Washington. One can only hope some semblance of reason is restored before the whole sordid mess causes the trampled masses to resort to anarchy and armed revolution.

3 TokyoTom { 03.02.09 at 1:24 am }

And just think; Republicans probably could have avoided most of the worst by passing a carbon tax bill earlier in the decade – either with rebates or in lieu for eliminating corporate income taxes – and working to further streamline power markets.

4 Ed Reid { 03.02.09 at 3:53 pm }

Revenue neutral taxation may exist as a concept, but I can not bring myself to believe that it would ever be permitted to occur in the US. Our legislators can resist anything but temptation; and, tax revenue is certainly tempting.

I also question the plausibility of legislators streamlining markets of any kind. They could arguably do so by getting out of the way and allowing markets to work. However, I don’t believe that is in the cards, especially not in the current deck. The brilliance of markets is in the cumulative intelligence of the participants in the markets. The brilliance of market regulators is largely in the minds of the market regulators, as a brief review of the success of PURPA should illustrate beyond question.

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