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Viewpoint: Cap-and-trade fantasies

BY JONATHAN SLEMROD

Published January 27, 2009

During his presidential campaign, Barack Obama made many promises to clean up the environment. One of his proposals, which has been favored by other environmental activists, was to establish a cap-and-trade program. This would give the government the right to regulate greenhouse gases through a system of emissions trading. Under the plan, the government will give businesses credits that specify how many tons of pollutants — like carbon dioxide — they are allowed to emit. Businesses are permitted to then sell or trade any excess credits. With this plan in mind, Obama promises to “solve” global warming by reducing greenhouse gas emissions 80 percent by the year 2050. That prospect may sound great, but it's not as realistic as Obama hopes and will likely do major damage to our already-limping economy.

The government’s history of attempting to regulate emissions is long and harrowed. Last summer, Senators Joe Lieberman (I-Conn.) and John Warner (R-Va.) introduced the Climate Security Act, a cap-and-trade proposal that was the strongest global warming bill to ever make it to the Senate floor. By 2050, the act aimed for emissions to be 70 percent lower than 2005 levels. The Senate held a lengthy debate on the bill but it ultimately fell 12 votes short of advancing. But last summer's debate over the cap-and-trade bill was merely a litmus test. With Obama at the helm, a new, stronger cap-and-trade bill will inevitably resurface.

Obama probably won’t be able to rely on a unified Democratic Party to help his cause. During the debate on the Lieberman-Warner Climate Security Act, ten Democratic Senators from the Midwest — including Michigan’s own Carl Levin and Debbie Stabenow — sent a letter to their colleagues voicing concerns over the effect of a cap-and-trade on the manufacturing bases in their respective states. And their concerns were legitimate. A swift overhaul of the government’s climate control regulations could negatively affect businesses that will have to struggle to meet them.

And consumers will also be negatively affected. The Environmental Protection Agency estimated that the Climate Security Act would reduce the gross domestic product by 0.9 percent to 3.8 percent in 2030, and 2.4 percent to 6.9 percent in 2050. The EPA also predicts steep increases in electricity and gas prices with the scheme, which would negatively affect almost every corner of our economy. Higher energy costs will be passed directly onto consumers, and that includes anyone who pays an electric bill.

One group that will benefit from a cap-and-trade system is politicians. As lobbyists push for more credits for the companies they represent, politicians will reap the benefits of their favors. Thinking that the politics of cap-and-trade would work any other way in Washington is nothing more than a dream. If transparency and accountability were major concerns of Congress, they would support a simpler carbon tax, one which would charge polluters a dollar amount per ton of carbon emitted, and one that would avoid a massive expansion of bureaucracy in the process. But don’t hold your breath for such a solution to come to fruition — politicians enjoy the clout they will have in determining who gets carbon credits.

But if Congress waits too long to approve a cap-and-trade system, Obama will be able to allow Carol Browner, his newly-minted energy czar, to move towards regulating “dangerous pollutants” like carbon dioxide under the already existing Clean Air Act. If this happens, the government could regulate emissions on everything from schools to lawnmowers, causing an enormous financial burden on business and killing jobs. Worst of all, backdoor EPA regulation would skirt the Congressional debate on global warming where both sides of the debate can state their cases.

For anyone interested in continuing the debate, the College Libertarians and Young Americans for Freedom are hosting a lecture on February 3 by Patrick Michaels, a professor of environmental sciences at the University of Virginia and Senior Fellow at the Cato Institute in Washington, D.C. Michaels will present a viewpoint you might not hear elsewhere — that global warming is modest and by no means a crisis that merits such massive government involvement in its solution.

As Obama and Congress move toward expanding government in the name of preventing global warming, it is crucial that all sides of the scientific and policy communities are represented. This event is a great place to start, and skeptics are welcome.

Jonathan Slemrod is an LSA junior and the co-chair of the University chapter of College Libertarians.


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