Morning Bell: Cap and Trade Already Killing U.S. Economy
Posted May 22nd, 2008 at 9.29am in Energy and Environment.
When the Senate returns from its Memorial Day recess on June 2, lawmakers will begin debating the Lieberman-Warner cap-and-trade global warming bill. Many environmental activists are worried the bill will not pass this time, and they are counting on a future legislative victory since all three remaining presidential candidates support nearly identical cap-and-trade global warming plans. Unfortunately for the American people, past energy policy decisions are already slowing the U.S. economy in fundamentally the same way a fully implemented cap-and-trade plan would.
Under a cap-and-trade system, the government sets a “cap” on overall economy-wide carbon emissions and anyone who exceeds their government-allotted allowance is forced to buy credits (”trade”) from the government. These caps drive up energy prices, which in turn incentivizes consumers to consume less carbon-emitting energy. Higher energy prices are absolutely essential for cap-and-trade’s promised success. Without them, there would be little incentive to invest in new technologies that could cut carbon emissions.
Liberals have already been successfully “capping” the production of domestic energy sources for years. In 1995 President Clinton blocked drilling in the Arctic National Wildlife Refuge. In 2006 Senate Democrats blocked drilling on the Outer Continental Shelf. By government estimates, these areas may contain 25 billion to 30 billion barrels of oil (against about 30 billion barrels of proven U.S. reserves today) and 80 trillion cubic feet or more of natural gas (compared with about 200 tcf of proven reserves). Estimates of ANWR alone show almost 5% of present U.S. oil use has been “capped” out of existence.
And what has been the result of these caps on domestic oil production? Sky high energy prices. Retail gasoline is in its 15th straight day of record highs. American Airlines is mothballing planes, cutting flights and raising prices. For the first time since 1991, the Department of Energy reported that gasoline use was down. Goldman Sachs predicts that oil could top $140 a barrel this summer and average $200 a barrel next year. Such prices are already proving to be a major drag on the economy.
Implementation of Lieberman-Warner would only worsen these trends. The Heritage Foundation released a study this month estimating that the impact of Lieberman-Warner on the U.S. economy would be a cumulative loss in gross domestic product of at least $1.7 trillion. And this is on top of what the Congressional Budget Office shows would be a $1.21 trillion increase in taxes between 2009 and 2018.
No wonder so many Democrats are already backing away from their support of the bill. Sens. Sherrod Brown (D-Ohio), Maria Cantwell (D-Wash.), Kent Conrad (D-N.D.), Ben Nelson (D-Neb.), and Claire McCaskill (D-Mo.) have all expressed second thoughts about the bill after considering how badly it would hurt their state economies. Hopefully after a summer on the campaign trail listening to voters’ concerns about gas prices and the economy, America’s presidential candidates will reach a similar conclusion.
Quick Hits:
- The San Francisco Bay Area’s Air Quality Management District board voted 15 to 1 to charge companies 4.4 cents per ton of carbon dioxide they emit — a $50,000 a year cost for local power plants and refineries.
- Liberals in Congress want to amend the Clean Water Act to give the federal government power over your backyard swimming pool.
- Alaska Gov. Sarah Palin (R) will sue the U.S. government to stop the listing of the polar bear as a threatened species, arguing the designation will slow development in the state.
- A clerical error in the House’s override of President Bush’s veto of the $307 billion farm bill may cause the House to resend the bill to Bush after Memorial Day.
- Rep. Laura Richardson’s (D-Calif.) second home in Sacramento, Calif., was foreclosed when she could not make the payments because she already spent hundreds of thousands of dollars on her own special election campaign.
- Author: Conn Carroll
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May 22, 2008 Jason Welker, Shanghai writes:
You seem to confuse the “capping” of energy production and the “capping” of greenhouse gas emissions. You accuse democrats of capping energy production by preventing drilling in ANWR, which according to you could potentially have kept energy prices higher than they otherwise would be. But you yourself state that only “5 percent of present U.S. oil use has been ‘capped’ out of existence.” So say we had drilled in ANWR and elsewhere; best case scenario, energy prices would be 5% lower than they are now? Hardly seems worth destroying one of America’s last remaining natural treasures for, eh? 20 cents on the gallon, in the best case?
The real reason for high energy prices is not a cap and trade program aimed at incentivizing energy producers to become more efficient, rather the continued increase in demand in emerging economies, along with Americans’ and the nation’s reluctance to incorporate more renewables and efficient energy production techniques into our own energy portfolio: the very goal of a cap and trade program, mind you.
To equate a emissions cap and trade system with some other “cap” on energy production advocated by “environmentalists” and “liberals” is misleading. A cap and trade emissions permit scheme is a market based solution to a real world environmental and economic problem that America has avoided dealing with for long enough!