Waxman-Markey Cap and Trade Will Pay For Itself, CBO Finds
There’s four simple steps to how it works:
1. Count total greenhouse-gas emissions for the nation as a whole.
We would simply track fossil fuels at the points where they enter the economy: the pipeline or oil tanker or coal field. (As a nation, we currently emit 6 billion tons of CO2 a year from fossil fuels.)
2. Set a cap.
The emissions in the pollution permits must add up to no more than each years total Cap. Decide how much overall carbon emission is permissible for the year and require a permit for each ton of carbon dioxide emitted by upstream wholesalers or suppliers of fossil fuels. The Congressional Budget Office has found that this would affect only 7,400 US companies. Individuals and most businesses are not affected.
3. Distribute permits.
Permits can be valid for a single year, or for a multi-year period. One method for distributing them is auctioning; another is to give them away free on the basis of past emissions (“grandfathering”), past energy sales, or some other criterion. Permit holders can buy and sell allowances among themselves through auctions that determine the price of the permit. That’s the “trade” part.
4. Step it down.
Each year, distribute fewer emissions permits, on a predictable, published schedule that takes us to our targets. The gradual nature of this transition maximizes choice and flexibility in a way that narrowly targeted climate policies cannot match.
Then the market, left to itself, should gradually create more renewable energy to replace the fossil energy.
While price signals travel downstream through the economy to other businesses and to consumers, low income consumers are protected from the price rise by free permits.
This allows businesses and families to step down, stair by stair, at a pace that is safe and manageable with time to adjust through fuel efficiency and increasing renewable power like solar and wind power.
Images from frogdoggy and Al Gore and The Bus Project
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September 10th, 2009 at 3:10 pm
The CBO made its constant, foolish mistake that they always make. They neglect to ascertain the impact of the extra taxes on the economy as a whole. This is why they overestimate the costs of tax breaks and overestimate the income of tax hikes.
Nearly a trillion dollars will be removed from efficient, productive businesses in the economy to fund unproductive businesses such as sequestration and inefficient businesses such as wind farms. Saying that it won’t negatively affect the economy is like saying hogwash doesn’t stink.
In medicine, if a doctor downplayed the side-effects of a surgery, calling a near-paralyzed limb a “reduction in dexterity” or even worse, a “reduced pain sensitivity in arm”, they would have thier license revoked for a gross violation of informed consent. We should ask the same honesty of our rulers. This may be necessary, but do not DARE lie about the downsides to cap-and-trade. People need to go into it with their eyes wide open and their rose colored glasses off.
September 10th, 2009 at 4:17 pm
“They neglect to ascertain the impact of the extra taxes on the economy as a whole”
No, Cap and Trade is not “taxes”. While there is a Cap on pollution, there’s provisions in the bill to prevent the fossil companies from passing on the costs (to them) of not switching to new renewable energy, but sticking with fossil fuels.
“Saying that it won’t negatively affect the economy is like saying hogwash doesn’t stink.”
It will cut into fossil company profits, but not consumer pockets (because of those consumer protections).
September 10th, 2009 at 6:17 pm
Susan – Please tell us you don’t mean or believe what you wrote!
Cap & Trade or taxes it is all the same – money out of the system. The provisions to prevent the utilities from passing on the costs are silly and will go away.
The utilities should operate at a loss to allow greens to feel good and happy? Don’t think so.
September 10th, 2009 at 8:19 pm
Love your comments, Russ, but Cap and Trade does not take money out of the system.
It is just moving money from fossil energy to renewable energy. The money itself stays in the economy; growing a carbon-free economy.
Fossil companies can invest in renewable energy, too, you know.
September 10th, 2009 at 10:25 pm
This cap and trade bill will cap the emissions, capping emissions means less operation of plants, less operation of plants means less jobs…Not exactly what we need in the middle of a recession. I say no, what do you say? Make your voice heard http://tinyurl.com/klfut8
September 11th, 2009 at 1:08 am
Cap and trade would be the largest disaster our farmers have ever faced.
September 11th, 2009 at 1:16 pm
I am not at all arguing for the fossil fuel companies – they will be around far longer than I!
Reduced carbon is necessary but to many people think it is a simple and painless transition – it will not be.
I am simply saying that when market controls force the purchase and additional expenditure on Cap N Trade, money that would normally be spent on household items or food is no longer there.
Also, utility costs such as Cap N Trade are pass throughs – they definitely go to the consumer.
September 11th, 2009 at 7:16 pm
Russ, Stacy, kan, see for solutions to these issues you raise
http://cleantechnica.com/2009/09/11/76-of-cap-and-trade-bill-allowances-benefit-people-not-polluters/
September 12th, 2009 at 5:21 am
I think for the Maxman-Markey bill to be enacted into law and to really become a healthy transition for the U.S. and world economy, the idea of sustainable living will not be anything like it is now. It will become one of the fundamental responsibilities of being human. Right now, the unknowns about exactly what will happen with this Bill is creating a lot of doubt and fear, which is expected. Through millions of frightened people it becomes amplified. We have to face the consequences of this transition with a boldness unlike anything ever seen. The infrastructure to implement renewable energy into the economy is massive and will take a good amount of time. I don’t think it’s going to be painless either, and will probably end up hurting in the short run. However we’re facing a dire future that will hurt like nothing ever felt before if we keep delaying action.
I don’t feel the devil’s in the details at all in this Bill, not one bit. We have the knowledge and ability to make the transition to a sustainable economy. It’s in the attitudes we have. Our attitudes have to change first, or at least be willing to be flexible.
Unfortunately we wait for disasters to happen before we come together as a people – cooperating, sharing, doing whatever it takes and helping out, but that too, we have a choice.
September 13th, 2009 at 1:14 pm
Comrades!
You will receive the Order of Lenin for your efforts in advancing the Communist Cause!
Socialize! Socialize! Socialize!
Altogether Now!
http://www.youtube.com/watch?v=suVB3YGIUk0
September 16th, 2009 at 1:42 pm
As the President of a rural electric cooperative I have been following this discussion from its beginning. From my understanding of the situation I am prepared to say that cap and trade works as an incentive to produce emissions-free energy. The externalities of fossil fueled power are not being included in the equation of the costs of power today. Cap and trade makes these costs real and requires a response to them. Power companies need not use less or cleaner forms of fossil fuel under a cap and trade program. They will just pay a higher price for their use of traditional fuels. These costs will be passed on to their customers. Carve outs for citizens for recovery from price impacts are in the current bill that is before the Senate. This will lessen the financial impact on individuals. Conservation measures will be implemented by large users who do not fully recover costs. Excessive use of energy is rampant in our country so conservation is not only possible but appropriate. At the utilities we are preparing our members for impacts from cap and trade by educating them on energy conservation and efficiency and by offering them programs that will help with the implementation of such measures. Our board of directors and management team understand that we have a duty to provide energy to our members but we also have a moral responsibility to not harm them in the process. We further understand that discussions of economics are secondary to discussions of human health and the protection of the biodiversity of the world upon which all of our natural and man-made systems rely.
September 16th, 2009 at 6:46 pm
@James – interesting perspective.
“Power companies need not use less or cleaner forms of fossil fuel under a cap and trade program. They will just pay a higher price for their use of traditional fuels.”
Yes. In the uproar over Cap and Trade – that gets missed.
“These costs will be passed on to their customers. Carve outs for citizens for recovery from price impacts are in the current bill that is before the Senate.
This will lessen the financial impact on individuals.”
Yes, this too. 76% of the benefits of Cap and Rebate” aspect of trade go to individuals as rebates and subsidies to reverse the cost increases in electricity if their utility won’t buy renewables.
September 17th, 2009 at 4:29 am
M. jones – Good to see conservatives embracing intelligence and rational thought. When Glenn Beck comes TV on do yourself a favor and turn it off. I am so glad I left America. The stupidity is mind boggling OBAMA IS A SOCIALIST! Take a civics course or better yet grow a brain. I’m guessing a Christian home school education
September 17th, 2009 at 11:27 am
This whole “communist” and “socialist” rhetoric is so tiring and ignorant.