Policy Documents

Cap-and-Trade

Brian Costin –
April 4, 2008

As the scientific community becomes increasingly skeptical of claims that global warming is manmade and portends a crisis, government calls for carbon dioxide (CO2) cap-and-trade systems are premature at best and economically disastrous at worst.

Far from being a dangerous pollutant, carbon is a basic component of all living cells, and life on Earth actually depends on carbon dioxide. In fact, increased CO2 concentrations make plants grow faster and bigger and provide improved food chain conditions for humans and animals. It would be criminal to classify such an essential and beneficial resource as a pollutant.

Besides being based on bad science, CO2 cap-and-trade systems threaten the nation's economy and citizens' financial well-being. A cap on energy production amounts to a tax on all goods and services. Multiple studies have found that a modest cap-and-trade system to limit carbon emissions according to Kyoto Protocol measures (7 percent below 1990 levels) would reduce domestic economic growth by almost 2 percent per year, increase gasoline prices by 53 percent, and raise other energy prices by 86 percent.

If the nation were to adopt Al Gore's desired 90 percent reduction in carbon dioxide emissions, the resulting energy scarcity and price inflation would simply destroy the economy.

All that sacrifice would likely be for nothing. When a cap-and-trade system was implemented in the European Union, emissions actually rose by a greater percentage than in the United States. Cap-and-trade systems are notoriously difficult to enforce, and many politically connected companies in Europe have been found to be fudging the numbers and selling "unused" credits without actually reducing emissions. Europe's carbon cap-and-trade systems are permeated by fraud.

In a cap-and-trade system, government essentially takes ownership of all CO2 emissions and distributes "carbon credits" to the private sector. Politicizing energy distribution and usage through cap-and-trade systems is a great way to reward politically connected energy producers at the expense of the general population, the energy consumers.

The following articles will help you gain an understanding of the environmental and economic consequences of proposed cap-and-trade systems, and the global warming alarmism that is behind such proposals.


Nature, Not Human Activity, Rules the Climate
http://www.heartland.org/Article.cfm?artId=22835
The Nongovernmental International Panel on Climate Change provides an independent examination of the evidence available on the causes and consequences of climate change in the published, peer-reviewed literature, viewed without bias or selectivity.

Fact and Comment: Brrr!
http://www.forbes.com/forbes/2008/0310/019.html
Steve Forbes comments on reasons to doubt that there is a manmade global warming crisis, and considers the lack of benefits from adopting such a system and the problems Europe has encountered with its program.

NBC: Cap-and-Trade System Would Magically Make Unaffordable Energy Affordable
http://www.businessandmedia.org/articles/2008/20080314091551.aspx
The Business and Media Institute reports on an NBC ‘Nightly News’ report praising a carbon-free solar energy plant. But electricity from solar energy costs four times as much as energy from natural gas or coal-fired plants.

Cap-and-Trade Would Stifle Economy, Delay Transition to Cleaner Fuels
http://www.heartland.org/Article.cfm?artId=22944
The George C. Marshall Institute outlines the numerous practical difficulties in implementing a cap-and-trade system, as well as its negative effects.

Beware of Cap-and-Trade Climate Bills
http://www.heritage.org/Research/Economy/wm1723.cfm
The Heritage Foundation looks at several government studies, summarizes numerous serious problems a cap-and-trade system would cause, and questions the basis for such legislation.

Cap-and-Trade Could Cost Average Family $10,800 in Lost Income, Says Economist Arthur Laffer
http://prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/09-17-2007/0004664103&EDATE
This article addresses the cost of a cap-and-trade system to the average consumer, using the analysis of economist Arthur Laffer.

Cap-and-Trade: A Bad Tradeoff for the Economy and Company Earnings
http://www.freeenterpriser.com/documents/Capital%20Comment%201.pdf
The Free Enterprise Education Institute provides an excellent summary of the costs and problems inherent in a cap-and-trade system, especially the harm it would do to economic growth.