Policy Documents

Research & Commentary: President Barack Obama’s Cap-and-Trade Plan

Peter Fotos –
October 8, 2009

The Obama administration, with support from the majority party in Congress, is promoting a carbon emissions cap-and-trade plan that could spell disaster for the nation—especially given the current delicate state of the U.S. economy. Legislation proposed by Reps. Henry Waxman (D-CA) and Edward Markey (D-MA) already has passed the House of Representatives, and Sens. Barbara Boxer (D-CA) and John Kerry (D-MA) have introduced similar legislation in the Senate.

The costs would be staggering. Ben Lieberman, a senior policy analyst with The Heritage Foundation, told Senate staff the Waxman-Markey bill plan would reduce gross domestic product by $9.4 trillion between 2012 and 2035, and the annual cost to American households would average almost $3,000. The National Black Chamber of Commerce released a study concluding Waxman-Markey would cut employment by 1.5 to 3.6 million people.

The European Union has implemented a cap-and-trade program similar to the one proposed by the Obama administration. Since its inception, the program has been plagued by fraud and corruption, emissions have risen more rapidly as a share of GDP than in the United States, manufacturing plants have been forced to shut down for portions of the day, countries with lenient environmental regulations have profited as firms move where it’s less expensive to do business, and energy prices for European citizens have increased dramatically.

Studies have found that even a modest U.S. cap-and-trade system to limit carbon emissions to levels established by the Kyoto Protocol (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.

The following articles shed light on the environmental and economic consequences of cap-and-trade policies.

Impact on the Economy of the American Clean Energy and Security Act of 2009
http://www.nationalbcc.org/images/stories/documents/CRA_WaxmanMarkey_Aug2008_Update_Final.pdf
The National Black Chamber of Commerce examines the economic impact of Waxman-Markey.

Waxman-Markey’s Effect on Gas Prices in Your State
http://www.heritage.org/Research/EnergyandEnvironment/wm2598.cfm
Study by The Heritage Foundation dealing with cap-and-trade’s effect on gas prices.

Cap & Trade: Why It’s Tax & Spend
http://www.nypost.com/seven/06022008/postopinion/opedcolumnists/cap__trade__why_its_tax__spend_113509.htm
The New York Post says a cap-and-trade bill would impose an average of more than $80 billion in new energy taxes every year. It would turn carbon dioxide into the new tobacco—a “vice” Uncle Sam profits from in the name of combating.

Why Cap-and-Trade Could Backfire
http://www.csmonitor.com/2008/0716/p09s02coop.html
Environmentalists claim capping greenhouse gas emissions and creating a market for emissions trading would reduce carbon dioxide output. But it could achieve the opposite effect.

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

Britain’s Big Polluters Accused of Abusing EU’s Carbon Trading Scheme
http://www.guardian.co.uk/business/2009/jan/27/industryabusingetscarbontrading
The London-based Guardian takes a look at corruption that has plagued the European Union’s cap-and-trade system.

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 summarizes the costs and problems inherent in a cap-and-trade system, especially the harm it would do to economic growth.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other environment topics, visit The Heartland Institute’s Web site at http://www.heartland.org and PolicyBot, Heartland’s free online research database.

If you have any questions about this issue or The Heartland Institute, you may contact me at 312/377-4000 or pfotos@heartland.org.