Reasons why Cap and Trade is a Bad Idea:
4. Cap and trade for sulfur dioxide emissions is not comparable to cap and trade for carbon dioxide. Proponents of cap and trade point to the sulfur dioxide program as an example of how easy and effective it would be to institute an economy-wide cap and trade program for CO2. But sulfur dioxide and carbon dioxide emissions are not comparable. When the sulfur dioxide program started, it targeted only 110 coal-fired power plants. Later, it was expanded to 445 power plants.<10> Greenhouse gas emissions are released from millions of sources, including electricity production, planes, trains, automobiles, ships, home furnaces, fertilizer production, farm animals, and millions of other sources, including humans. Regulating millions of different and individual sources of emissions is considerably different from regulating 445 plants.
Also, many low-cost sulfur dioxide control options existed when the program took effect.<11> This is not the case with carbon dioxide control technologies. There are no control technologies that are commercially available at commercially-competitive prices. One way to reduce sulfur dioxide emissions was to use “low-sulfur coal” but there is no “low-carbon dioxide coal.”<12>
1. The point of cap and trade is to increase the price of energy. Cap and trade is designed to increase the price of 85 percent of the energy we use in the United States. That is the point. For it to “work,” cap and trade needs to increase the price of oil, coal, and natural gas to force consumers to use more expensive forms of energy. President Obama’s OMB director, Peter Orszag, told Congress last year that “price increases would be essential to the success of a cap and trade program.”<1>
2. Cap and trade schemes for carbon dioxide have not worked to reduce emissions. Europe’s Emissions Trading Scheme (ETS) began in 2005. The first phase, from 2005 to2007, did not reduce carbon dioxide emissions. Instead, overall emissions increased 1.9 percent over that period.<2> The reason is simple: European politicians know that cap and trade is economically harmful and do not want these policies to cost more jobs, especially during these difficult economic times. German Chancellor Angela Merkel recently stated that she would not allow EU climate regulations to go forward that would “take decisions that would endanger jobs or investments in Germany.”<3>
Cap and trade will harm the poor. According to the Congressional Budget Office, the costs of reducing carbon dioxide emissions would disproportionally harm the poor. A mere 15 percent decrease in carbon dioxide emissions would cost the lowest-income Americans 3.3 percent of their income, but only 1.7 percent of the income of higher income households.<4> President Obama wants to decrease greenhouse gas emissions by 83 percent, not a mere 15 percent. This will entail much greater economic sacrifice among those who have the least to spare.
3. Cap and trade harms energy security. Some proponents of cap and trade claim that cap and trade will improve energy security. Unfortunately, this is exactly backwards—a cap and trade scheme will undermine and erode our nation’s energy security. When many people express concern about energy security, they are concerned about oil imported from foreign countries. They do not realize that domestically produced oil is our number one source of oil<5> and Canada is our number source of oil outside the U.S. During 2007, the last complete year for which data is available, only 17 percent of the oil we consumed came from the Middle East.<6>
But cap and trade will assess a heavy penalty on Canadian oil. Much of the oil we get comes from its vast reserves of oil sands. Because it requires more energy to extract the resources from those sands than it does to produce oil in the Middle East, cap and trade will make Canadian oil more expensive than oil from the Middle East.
Cap and trade, therefore, creates incentives to import more oil from the Middle East, not less. Cap and trade also penalizes domestic oil extraction from oil shale. In Colorado, Utah, and Wyoming, estimates suggest that 800 billion barrels of oil resources are ready to be produced.<7> For a sense of scale, that’s more than three times as much oil as Saudi Arabia has in its reserve. Also, the U.S. has the world’s largest coal reserves.<8> At current usage rates, we have 200-250 years of demonstrated coal reserves.<9> Coal-to-liquids could give the U.S. much larger reserves of petroleum fuels.
Indeed, the cost-effective way to reduce carbon dioxide emissions is to use less energy. But energy is the lifeblood of the economy. Energy allows us to do more work with less time and effort. As a result, there is a strong correlation between energy use and economic prosperity, as the chart below demonstrates:
http://www.instituteforenergyresearch.org/2009/03/12/cap-and-trade-primer-eight-reasons-why-cap-and-trade-harms-the-economy-and-reduces-jobs/
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