Cap-and-Trade Disaster Averted, but More Mandates Loom

Published January 3, 2011

Although Congress has rejected proposed legislation to impose cap-and-trade restrictions on the U.S. economy, mandates are still being pressed. The U.S. Environmental Protection Agency and various state governments are seeking to restrict carbon dioxide emissions. Moreover, federal and state renewable power mandates would impose the same economy-killing mandates under a different name.

No Supporting Rationale
Larry Bell, author of the outstanding book Climate of Corruption (reviewed in the December 2010 issue of Environment and Climate News), has persuasively documented the flaws in cap-and-trade schemes. Bell opened his chapter on cap and trade with this statement:

“Cap and trade legislation, a major Obama administration priority, has no defensible purpose without a supporting global warming crisis rationale. It also makes no sense from an economic standpoint. It will place onerous cost burdens upon energy consumers, continue to drive business overseas, and offer no real climate or environmental benefits whatsoever.”

The same statements also apply to EPA regulations designed to make an end run around defeated legislation, as well as renewable power mandates that are essentially cap-and-trade restrictions minus the trading mechanisms.

Alarmists’ Premises Critiqued
Bell points out government restrictions on carbon dioxide emissions are promoted on the errant and deceptive argument that restrictions: (1) will help protect our planet from dangerous climate change and pollution; (2) are needed to wean the United States and the world away from excessive energy consumption; and (3) will incentivize energy technology and conservation innovations that will lead to independence from foreign oil.

Bell notes the initial premise is wrong on two counts. First, there is no real evidence of any human-caused climate crisis, and second, there is no evidence that reducing our carbon dioxide emissions will have any significant impact on global temperatures.

Regarding the second premise, that carbon dioxide restrictions are necessary to reduce energy consumption, Bell chronicles how the push to reduce energy consumption has its roots in ideological agendas that are hostile to Western democracies. Energy consumption restrictions are proposed as a means of driving up costs for free market economies that produce far more goods and services—and thus consume far more energy—than command-and-control governments and economies that dominate Third World nations. Driving up costs in currently free markets would eliminate the economic disparity between economic freedom and economic oppression.

The third premise, that carbon penalties will incentivize alternate energy innovations, is absurd, Bell writes. Governments’ attempts to tilt the playing field by picking winners and losers deter technological and economic innovation instead of encouraging it. Moreover, the United States has enormous quantities of the very coal, natural gas, and oil that are targeted by carbon dioxide restrictions. Of these three fuel sources, only oil is imported in relatively large quantities, and this is so primarily because the advocates of carbon dioxide restrictions have rendered most of our oil reserves off-limits for economic development.

Prone to Fraud
A close look at cap-and-trade schemes reveals how susceptible they are to cheating and fraud. After the European Union imposed cap-and-trade restrictions, the European Criminal Intelligence Agency reported as much as 90 per cent of Europe’s carbon trades involved fraudulent activity, with such schemes totaling nearly $7 billion U.S. dollars in 2009 alone.

Among the fraudulent cap-and-trade schemes were claims of tree-planting that never occurred, claims of foregone deforestation that never would have occurred anyway, and entities drawing up frivolous plans to build high-emitting factories or power plants and then pocketing emission-reduction credits for not building them after all.

Crony Capitalism
The most disappointing aspect of cap-and-trade politics is the manner in which many American corporations have supported a scheme that would boost their corporate profits while harming the nation as a whole. For example, more than 30 large corporations formed the U.S. Climate Action Partnership to lobby for cap-and-trade restrictions because they stood to make money off of forcing Americans to pay more for their energy.

The likes of Duke Energy, ALCOA, General Electric, Dupont, and a host of others recognize cap-and-trade would be a cash cow for them. Government action to restrict markets and raise energy costs—thereby reducing consumers’ living standards—for a corporate block that stands to make money off of the scheme is crony capitalism at its worst. 

Corporations that did not stand to gain directly from cap-and-trade eventually capitulated in the belief such restrictions were inevitable. Winston Churchill once described this strategy as “one who feeds the crocodile in hopes that it will eat him last.”

Punishing the Economy
Regardless of which businesses would or would not be on the government’s cap-and-trade dinner menu, U.S. consumers would certainly be the main course. By forcing consumers to purchase higher-priced energy, whether through a carbon tax, a cap-and-trade scheme, or renewable power mandates, U.S. households would have to spend a higher portion of their family budget on power, which would force reductions in the amount of money available for housing, clothes, education, nutritious foods, health care, environmental programs, and durable consumer goods.

The Heritage Foundation’s Center for Data Analysis estimated the Waxman-Markey climate change legislation that nearly became law in 2009 would cost $161 billion annually by the year 2020. That translates to $500 per U.S. household per year by the year 2020, and most of the restrictions and most of the costs would actually kick in after 2020.

Jay Lehr, Ph.D., ([email protected]) is science director of The Heartland Institute.