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Cap and Trade: A Crisis in the Making

With health care reform, racist czars, and the war in Afghanistan taking front-stage lately, the Waxman-Markey bill (H.R. 2454) which contains cap and trade has gotten little attention.  While the bill has several promising proposals for modernizing our power infrastructure and moving us towards more sources of renewable energy, there are considerable issues with the market-based pollution controls in the bill.  This bill has the potential to create a crisis without having the potential to solve the unproven issue that it seeks to remedy.

The battle between global warming “believers” and “deniers” is becoming more-and-more a battle between U.N. scientists and the rest of the scientific community.  According to a 2009 Wall Street Journal article there are more than 700 non-U.N. scientists who are challenging the U.N.’s opinions on global warming.  The original count of scientists that authored the U.N. climate summary was only fifty-two.

Without a true crisis to force the enactment of this bill, the administration has to show that there are real benefits to turning it into law.  The costs are evident, the benefits are tougher to come by.

The proposed benefit of a cap and trade system is that it will limit the amount of C02 put into the air by making it progressively expensive to do so.  While the bills supporters say that the bill won’t put any stress on the economy, one would argue that in order for it to work, it would have to put an undue strain on CO2 emitters or they would not cut emissions.

In reality, emitters would have to pass the strain onto consumers after simply purchasing or acquiring more credits.  Conservative members of Congress attempted to protect citizens from out-of-control energy costs by adding in triggers that would suspend the program if energy costs exploded, but all of these measures were defeated by liberals.  If the bill isn’t going to cause an explosion in energy costs, why defeat these safety measures?  They had to get those safeties out of the bill because they know that energy prices are going to increase by $1900/year per family in the next ten years and almost $7,000 per family per year in the next quarter-century (Heritage Foundation study).

If we look at countries that have implemented cap and trade systems, more reasons to be concerned about this legislation arise.  Britain has had this type of system in place for just a few years and the British Taxpayer Alliance estimates that each family has seen their energy expenses rise by about $1300/year.  What’s worse yet is that Britain’s carbon emissions have actually increased.

This kind of pollution control is actually a ruse.  It turns out that the looking at the EU, who has implemented such a system, we learn that it’s more about control of industry than control of CO2.  The New York Times published an article that said that said that the cap-and-trade system was like, “a grandfather with a large family deciding what to give his favorite grandchildren for Christmas,…”.  The permits for CO2 end-up being handed out as favors from those governments to the companies that have garnered the most favor with the ruling party.

Power.  That is primarily what Barack Obama and the liberals are after.  They’ve already taken over an insurance giant, one of the largest manufacturers in the United States, and now they need the rest of the free market to be less-free.  If a company gets out-of-line with the liberal’s wishes, they can force them to buy carbon credits on the open market.  If a company is doing as they are instructed, they might earn free credits from the government.

Although the current bill seems to focus on electricity producers, once successfully implemented as a mechanism to influence companies, their will be no end to who will be directly affected by this legislation.

This form of pollution control has implications that are much more dire than centrist control of the economy or electric bills going through the roof.  It might utterly destroy American company’s ability to compete in the global marketplace.  China and India have no reason to enact such reforms (China already has central control of industry).  That means our products will have higher costs (and therefor prices) without a matching increase in the demand for those products.  If we think 10% unemployment stinks, imagine what that number will look like when Ford, Toyota, General Mills, etc all have to move to India to compete.

It is also perceivable that this will create a new commodities market that large investment firms may jump into.  The Goldman-Sachs’s of the country will eagerly create complex carbon credit products to market to investors and give control of energy prices to a few giants of finance.

We’ve looked at will most-likely happen.  We could also look at governments that have been considering cap and trade systems recently.  In 2008, New Zealand suspended it’s weeks-old cap-and-trade system due to concerns of uncontrollable energy costs and no proven benefits from the countries that had already taken this delusional path.

For now, it appears that cap and trade is idling in the Senate ever since it marginally passed the house (219 votes for to 212 against).  The Democrats have started to criticize the bill as the renewable energy sections of the bill have become more watered down after going for mark-up in the Senate.  Conservatives are concerned that it is all cost with no benefit.  Only time will tell if this will ever see the light of day.

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