Cap and Trade

[TheMercenary]

Interesting commentary from the WSJ:

The Cap and Tax Fiction
Democrats off-loading economics to pass climate change bill.

House Speaker Nancy Pelosi has put cap-and-trade legislation on a forced march through the House, and the bill may get a full vote as early as Friday. It looks as if the Democrats will have to destroy the discipline of economics to get it done.

Despite House Energy and Commerce Chairman Henry Waxman's many payoffs to Members, rural and Blue Dog Democrats remain wary of voting for a bill that will impose crushing costs on their home-district businesses and consumers. The leadership's solution to this problem is to simply claim the bill defies the laws of economics.

Their gambit got a boost this week, when the Congressional Budget Office did an analysis of what has come to be known as the Waxman-Markey bill. According to the CBO, the climate legislation would cost the average household only $175 a year by 2020. Edward Markey, Mr. Waxman's co-author, instantly set to crowing that the cost of upending the entire energy economy would be no more than a postage stamp a day for the average household. Amazing. A closer look at the CBO analysis finds that it contains so many caveats as to render it useless.

For starters, the CBO estimate is a one-year snapshot of taxes that will extend to infinity. Under a cap-and-trade system, government sets a cap on the total amount of carbon that can be emitted nationally; companies then buy or sell permits to emit CO2. The cap gets cranked down over time to reduce total carbon emissions.

To get support for his bill, Mr. Waxman was forced to water down the cap in early years to please rural Democrats, and then severely ratchet it up in later years to please liberal Democrats. The CBO's analysis looks solely at the year 2020, before most of the tough restrictions kick in. As the cap is tightened and companies are stripped of initial opportunities to "offset" their emissions, the price of permits will skyrocket beyond the CBO estimate of $28 per ton of carbon. The corporate costs of buying these expensive permits will be passed to consumers.

The biggest doozy in the CBO analysis was its extraordinary decision to look only at the day-to-day costs of operating a trading program, rather than the wider consequences energy restriction would have on the economy. The CBO acknowledges this in a footnote: "The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap."

The hit to GDP is the real threat in this bill. The whole point of cap and trade is to hike the price of electricity and gas so that Americans will use less. These higher prices will show up not just in electricity bills or at the gas station but in every manufactured good, from food to cars. Consumers will cut back on spending, which in turn will cut back on production, which results in fewer jobs created or higher unemployment. Some companies will instead move their operations overseas, with the same result.

When the Heritage Foundation did its analysis of Waxman-Markey, it broadly compared the economy with and without the carbon tax. Under this more comprehensive scenario, it found Waxman-Markey would cost the economy $161 billion in 2020, which is $1,870 for a family of four. As the bill's restrictions kick in, that number rises to $6,800 for a family of four by 2035.

Note also that the CBO analysis is an average for the country as a whole. It doesn't take into account the fact that certain regions and populations will be more severely hit than others -- manufacturing states more than service states; coal producing states more than states that rely on hydro or natural gas. Low-income Americans, who devote more of their disposable income to energy, have more to lose than high-income families.

Even as Democrats have promised that this cap-and-trade legislation won't pinch wallets, behind the scenes they've acknowledged the energy price tsunami that is coming. During the brief few days in which the bill was debated in the House Energy Committee, Republicans offered three amendments: one to suspend the program if gas hit $5 a gallon; one to suspend the program if electricity prices rose 10% over 2009; and one to suspend the program if unemployment rates hit 15%. Democrats defeated all of them.

The reality is that cost estimates for climate legislation are as unreliable as the models predicting climate change. What comes out of the computer is a function of what politicians type in. A better indicator might be what other countries are already experiencing. Britain's Taxpayer Alliance estimates the average family there is paying nearly $1,300 a year in green taxes for carbon-cutting programs in effect only a few years.

Americans should know that those Members who vote for this climate bill are voting for what is likely to be the biggest tax in American history. Even Democrats can't repeal that reality.

http://online.wsj.com/article/SB124588837560750781.html

[TheMercenary]

This is transparency????? What's the rush? What is hidden and what are they hiding?

Will Congress Read Bills Before Voting?

Last month, when Republicans tried to stall energy legislation with hundreds of amendments, Democrats hired a speed reader to get through them all. Now, with Democratic leadership barreling through its hefty agenda this summer, it looks as if the speed reader's services may be needed once more.

Various grassroots organizations are blasting Congress for not taking the time to properly consider the energy bill or health care reform -- two very significant pieces of legislation.

Let Freedom Ring, a non-profit, grassroots organization that supports a conservative agenda, announced an initiative today urging members of Congress to sign a pledge to read and give citizens the opportunity to read any health care reform legislation before voting on it.

"For something as significant as health care reform, which influences 16 percent to 17 percent of GDP, I think it is important for legislators to know what they're voting on, and not have lobbyists and staff members be the only ones who know what's in there," said Colin Hanna, Let Freedom Ring president.

The pledge was distributed to members of Congress on Tuesday, and Hanna has so far received signatures from Senators James Inhofe (R-Okla.) and Jim DeMint (R-S.C.). Certainly, Hanna said, it would be in the members' best interests to sign it.

"I can assure you, legislators will be held accountable if there are parts in there their constituents find objectionable," he said.

Meanwhile, the Sunlight Foundation, a non-profit with the goal of increasing government transparency, is raising similar concerns about the energy bill that the House of Representatives is slated to vote on Friday.

With a full House vote just days away, the authors of the deal are still negotiating the details, the New York Times has reported. In a measure as complex as the energy bill -- which consists of around 1,000 pages -- the details can make a big difference.

"The fastest speed-readers and the most intelligent minds can't make informed decisions with that much time. How can Congress?" Sunlight Foundation Engagement Director Jake Brewer said today in a statement. "The problem here is the bill wasn't developed in the open in a committee, so no one -- including those members of Congress not on the Energy Committee -- knows how this latest version was created."

The foundation points out that while the bill, formally called the American Clean Energy and Security Act, was 946 pages long last week, it has ballooned to 1,201 pages in recent days with little explanation for how or why. The group is supporting a bill introduced last week that would require the House to post all non-emergency legislation online 72 hours before debate begins.

Hanna said Congress could benefit by keeping legislation simpler.

"Legislation has become so complex, you can really make the arugment the system the framers devised is broken," he said. "Most bills are voted upon without those voting understanding much of what's in it."

That's when members are forced to resort to speed readers. "It makes a mockery of the process," Hanna said.

http://www.cbsnews.com/blogs/2009/06...y5110850.shtml

[TheMercenary]

Get out your wallets. I am just glad I don't live where it snows.

House Democrats win key test vote on climate bill

WASHINGTON (AP) - House Democrats narrowly won a key test vote Friday on sweeping legislation to combat global warming and usher in a new era of cleaner energy. Republicans said the bill included "the largest tax increase in American history."
The vote was 217-205 to advance the White House-backed legislation to the floor, and 30 Democrats defected, a reflection of the controversy the bill sparked.


The legislation would impose limits for the first time on carbon dioxide and other greenhouse gas pollution from power plants, factories and refineries. It also would force a shift from coal and other fossil fuels to renewable and more efficient forms of energy. Supporters and opponents agreed the result would be higher energy costs, but disagreed widely on the impact on consumers.

President Barack Obama has made the measure a top priority of his first year in office. The president, along with White House aides and House Democratic leaders, scrambled for the votes to assure passage. Speaker Nancy Pelosi, D-Calif., has pledged to get the legislation passed before lawmakers leave on their July 4 vacation.

The Senate has yet to act on the measure, and a major struggle is expected.

In the House, the bill's fate depended on the decisions of a few dozen fence-sitting Democrats, mainly conservatives and moderates from contested districts who feared the political ramifications of siding with the White House and their leadership on the measure.

Democrats left little or nothing to chance. Rep. Ellen Tauscher, D-Calif., confirmed by the Senate on Thursday to an administration post, put off her resignation from Congress until after the final vote on the climate change bill.

"The bill contains provisions to protect consumers, keep costs low, help sensitive industries transition to a clean energy economy and promote domestic emission reduction efforts," the White House in a statement of support for the legislation.

Republicans saw it differently.

This "amounts to the largest tax increase in American history under the guise of climate change," said Rep. Mike Pence, R-Ind.

While the bill would impose a "cap-and-trade" system that would force higher energy costs, Republicans for weeks have branded it an energy tax on every American.

But Rep. Jim McGovern, D-Mass., said there was a "moral imperative to be good stewards of the earth."

The legislation, totaling about 1,200 pages, would require the U.S. to reduce carbon dioxide and other greenhouse gas emissions by 17 percent from 2005 levels by 2020 and about 80 percent by the next century.

U.S. carbon dioxide emissions from the burning of fossil fuels are rising at about 1 percent a year and are predicted to continue increasing without mandatory caps.

Under the bill, the government would limit heat-trapping pollution from factories, refineries and power plants. It would distribute pollution allowances that could be bought and sold, depending on whether a facility exceeds the cap or makes greater pollution cuts than are required.

Obama on Thursday called it "a vote of historic proportions ... that will open the door to a clean energy economy" and green jobs. "It will create millions of new jobs," Pelosi insisted.

Both Obama and Pelosi preferred to focus on the economic issues rather than on what environmentalists view as the urgency of reducing carbon emissions blamed for global warming.

The Rust Belt coal-state Democrats who have been sitting on the fence worry about how to explain their vote for higher energy prices to people back home—and how the vote might play out in elections next year.

Republicans have been quick to exploit those concerns.

"Democratic leaders are poised to march many moderate Democrats over a cliff ... by forcing them to vote for a national energy tax that is unpopular throughout the heartland," Republican leader John Boehner of Ohio said.

There was widespread agreement that under this cap-and-trade system, the cost of energy would almost certainly increase. But Democrats argued that much of the impact on taxpayers would be offset by other provisions in the bill. Low-income consumers would qualify for credits and rebates to cushion the impact on their energy bills.

Two reports issued this week—one from the nonpartisan Congressional Budget Office and the other from the Environmental Protection Agency—seemed to support that argument.

The CBO analysis estimated that the bill would cost an average household $175 a year; the EPA put it at between $80 and $110 a year.

Republicans questioned the validity of the CBO study and noted that even that analysis showed actual energy production costs increasing $770 per household. Industry groups have cited other studies showing much higher cost to the economy and to individuals.

http://www.breitbart.com/article.php...show_article=1

[classicman]

Hosted by Google Back to Google News
Questions and answers about the US climate bill

By DINA CAPPIELLO and ERIC CARVIN – 16 hours ago

Cap-and-trade? Offsets? Pollution credits? The climate bill under consideration in the U.S. House of Representatives tackles global warming with new limits on pollution and a market-based approach to encourage more environmentally friendly business practices. But what exactly do the proposed rules mean, and how would they work?

Some questions and answers about the bill, a top legislative priority for President Barack Obama:

Q: What's the purpose of this legislation?

A: To reduce the gases linked to global warming and to force sources for power to shift away from fossil fuels, which when burned, release heat-trapping gases, and toward cleaner sources of energy such as wind, solar and geothermal.

Q: How does the bill accomplish this?

A: By placing the first national limits on emissions of heat-trapping gases from major sources like power plants, refineries and factories. This limit effectively puts a price on the pollution, raising the cost for companies to continue to use fuels and electricity sources that contribute to global warming. This gives them an incentive to seek cleaner alternatives.

Q: Is this the "cap-and-trade" idea that has been in the news?

A: Yes. The first step in a cap-and-trade program sets a limit on the amount of gases that can be released into the atmosphere. That is the cap. Companies with facilities that are covered by the cap will then receive permits for their share of the pollution, an annual pollution allowance. This bill initially would give the bulk of the permits away for free to help ease costs, but they still would have value because there would be a limited supply. Companies that do not get a big enough allowance to cover their pollution would either have to find ways to reduce it, which can be expensive, or buy additional permits from companies that have reduced pollution enough to have allowances left over. That is the trade. Companies typically would pick the cheaper option: reducing pollution or buying permits. They also have a third choice: They can invest in pollution reductions made elsewhere, such as farms that capture methane or plant trees. These are known as offsets.

Q: So the idea is to try to reduce the overall level of pollution, regardless of whether, say, a particular factory reduces emissions?

A: That is true in the beginning. But as the cap gets lower and lower, reaching an 83 percent reduction by 2050, eventually all polluters will have to reduce. It is merely a question of when. For instance, it will be very tough for coal plants to reduce emissions at the outset of the program because the technology to capture and store carbon dioxide is not yet commercially available. It probably is 10 to 20 years away. So they will be buying offsets and buying allowances from other entities that will have an easier time.

Q: Do most environmentalists support this approach?

A: Most do, at least broadly. Cap-and-trade has had success. Since 1990, the United States has had a cap-and-trade program for sulfur dioxide, the main culprit in acid rain. Democrats have had to make a lot of concessions to win votes for the current bill from lawmakers from coal, oil and farm states. Some liberal environmentalists think these concessions weaken the bill. For instance, the bill's sponsors have had to lower the cap — it originally called for a 20 percent cut by 2020 — to 17 percent. Research suggests that much deeper cuts will be needed globally to avert the most serious consequences of global warming.

Q: Who opposes this approach, and why?

A: Republicans, some farm groups, some environmentalists, the oil industry, which feels it has received too few free permits, and some moderate Democrats. They all worry about the cost and the loss of jobs if industries move to countries that do not have controls on greenhouse gases. The bill has provisions to prevent this, but there are questions whether they will work. Republicans call the bill a national energy tax on every American family. This is because, as industries spend money to reduce pollution or buy credits, they will pass on that cost to consumers, the people who turn on the lights or pump gas in their cars. Recent analyses by the nonpartisan Congressional Budget Office show that the new rules eventually will cost the average household an extra $175 a year.

Q: Under the bill, what will happen to companies that do not follow the rules?

A: If they exceed their limit, they will have to pay a fine equal to twice the cap-and-trade price for each ton of pollution over the limit.

Q: Other than costs potentially being passed along to consumers, will this affect most Americans' day-to-day lives?

A: It fundamentally will change how we use, produce and consume energy, ending the country's love affair with big gas-guzzling cars and its insatiable appetite for cheap electricity. This bill will put smaller, more efficient cars on the road, swap smokestacks for windmills and solar panels, and transform the appliances you can buy for your home.

Q: How quickly will we notice these changes?

A: Some will occur more quickly than others. For instance, measures to boost energy efficiency in buildings and appliances are the low-hanging fruit that does not require major infrastructure changes or new technologies. Other changes are decades off and probably will come when the cap gets more stringent and permits get more expensive. For instance, the country can build more wind and more solar panels, but currently it lacks the transmission lines to move the energy they generate to population centers. As for cars: While more efficient models are a near-term reality, it will take a while to change out the fleet. Some people will continue driving 10-year-old gas guzzlers.

Q: What are the chances this bill will become law?

A: Both the Obama administration and Democrats want this bill passed by the end of the year, when negotiations for a new international agreement to reduce greenhouse gases get under way in Copenhagen, Denmark. Even as Democrats hold the majority in Congress, it will not be easy to get this enacted. Many moderate Democrats from rural states and conservative districts are worried about the costs and complexity of the legislation when the economy is already weak. Very few Republicans, if any, are expected to support the bill. Approval of a climate bill in the Senate has been viewed as a long shot. Parts of the bill may need to be changed to secure approval in the Senate.

Q: Why is it so important to tackle global warming anyway?

A: Left untended, scientists say, global warming will cause sea levels to rise, increase storms and worsen air pollution. For these reasons, the Environmental Protection Agency recently concluded that six greenhouse gases pose dangers to human health and welfare. And politically, without U.S. action, developing countries like China probably will not agree to mandatory pollution limits.

[TheMercenary]

The inherent weakness in this plan is 1) It will only work if all companies participate. 2) How do they police the ones that participate or choose not to participate 3) If they rely on self reporting it will fail. 4) How do they conduct enforcement of the private corps.

[Flint]

I'm a little fuzzy on the part between the 12th paragraph and the 48th paragraph.

[Alluvial]

You can't really call it a 'tax'. It's a cost increase related to Washington's attempt to wean industry off of fossil fuels. Isn't it?

[TheMercenary]

Originally Posted by Alluvial

You can't really call it a 'tax'. It's a cost increase related to Washington's attempt to wean industry off of fossil fuels. Isn't it?

Any costs they incur will be passed on to the consumer. And it ain't going to be cheap...

[TheMercenary]

June 24, 2009
CBO Grossly Underestimates Cost of Cap and Trade
by David Kreutzer, Ph.D., Karen Campbell, Ph.D. and Nicolas Loris
WebMemo #2503

Last week, the Congressional Budget Office (CBO) released their analysis of the Waxman-Markey climate change bill that had proponents of the bill claiming Americans could save the planet for just $175 per household. That was the figure CBO estimated cap and trade would cost households in 2020 alone.[1]

Both the CBO's analysis and the subsequent legislation are troubled: The analysis grossly underestimates economic costs while the legislation will have virtually no impact on climate. Overall, there are a number of basic problems with CBO's analysis:

* Their allowance cost numbers do not add up;
* They ignore economic costs such as the decrease in gross domestic product (GDP) as a result of the bill; and
* The analysis is an accounting analysis, not an economic analysis.

Problems with Costs and Distribution of Allowances

The CBO's June 19 study projected that the allowance price--the price to emit carbon dioxide--will be $28 per ton of CO2 in 2020.[2] Since there are 5.056 billion tons of CO2 equivalent in the cap that year (the amount of carbon dioxide and other greenhouse gases businesses are allowed to emit), this projection implies a $141 billion gross cost; however, CBO lists the cost as $91.4 billion. Although there were no changes to the bill between June 5 and June 19, the CBO projected allowance revenues of $119.7 billion, $129.7 billion, $136 billion, $145.6 billion, and $152.9 billion for the years 2015-2019. As the cap on carbon dioxide becomes more stringent, one would expect the allowance revenue to continue to climb, not dramatically decrease to $91.4 billion.[3]

The goal of a cap-and-trade program is to reduce the amount of carbon dioxide and other greenhouse gases in the atmosphere. In order to realize such reductions, cap-and-trade programs establish absolute limits on total emissions of greenhouse gases. Before businesses in a covered sector can emit a greenhouse gas, they need to have the ration coupons (also known as allowances) for each ton emitted.The price a firm pays for these allowances, euphemistically referred to as "climate revenue," should be considered tax revenue. CBO mistakenly assumes that the government spending and distribution of allowance revenue is the dollar-for-dollar equivalent to a direct cash rebate to energy consumers--that is, that the carbon tax is not a tax if the government spends the money, which is simply preposterous.

Ignoring Economic Pain

Most problematic is the CBO's complete omission of the economic damage resulting from restricted energy use. As footnote 3 on page 4 of the CBO analysis reads, "The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap. The reduction in GDP would also include indirect general equilibrium effects, such as changes in the labor supply resulting from reductions in real wages and potential reductions in the productivity of capital and labor."[4] In The Heritage Foundation's analysis of the Waxman-Markey climate change legislation, the GDP hit in 2020 was $161 billion (2009 dollars). For a family of four, that translates into $1,870--a pretty big chunk of change that the CBO is ignoring.

It is also worth noting that, of the 24 years analyzed by The Heritage Foundation's Center for Data Analysis (CDA), 2020 had the second lowest GDP loss. Furthermore, the CDA found that for all years the average GDP loss was $393 billion, or over double the 2020 hit. In 2035 (the last year analyzed by Heritage) the inflation adjusted GDP loss works out to $6,790 per family of four--and that is before they pay their $4,600 share of the carbon taxes.[5] The negative economic impacts accumulate, and the national debt is no exception. The increase in family-of-four debt, solely because of Waxman-Markey, hits an astounding $114,915 by 2035.[6]

An Accounting Analysis, Not an Economic One

The CBO analysis is an accounting analysis of the flow of allowance revenue; it is not an economic analysis of the true opportunity cost of the bill. The analysis's "net cost" is essentially the cost of producing offsets and other emissions reductions--a process similar to a company's chief financial officer doing a cash-flow analysis of one investment project. The CBO does not take into account the dynamic general equilibrium consequences of the much higher energy prices: There are serious economic impacts from the energy price increases that they ignore.

The CBO and Congress seem to assume that energy price increases can be mitigated by giving allowance revenue back to businesses and consumers. This is not how the economy works. Prices are merely an information signal about the relative scarcity of real resources that are being used. For example, if farmers use their land, labor, and equipment to produce offsets, instead of planting more food crops, the price of food will go up. Yet the CBO report ignores this reality.

The CBO analysis cannot be used to debate the economic cost versus economic benefit of the bill. Instead, it can be used only to follow the money of the allowance revenue so policymakers and the public can understand exactly how that piece of the legislation is being handled. There is value in keeping an accounting of this revenue flow in order to determine who is getting what, but CBO should make it clear that this is the limit of their analysis.

It is inappropriate to go beyond this analysis, for example, by comparing CBO's cost estimates to those of The Heritage Foundation, the National Black Chamber of Commerce, or even the EPA, as many Members of Congress are already doing. These Members are simply trying to compare two different cost concepts--accounting versus economic. Although the EPA's analysis is flawed for other reasons,[7] mostly because of unrealistic assumptions, they at least attempt to estimate the economic cost, which the CBO did not.

Higher Taxes and Economic Devastation in Return for ... Nothing?

Regardless of the CBO's cost estimates of the Waxman-Markey cap-and-trade program, the necessary second part of the question--what benefits do the costs generate?--remains unanswered. Americans will get almost nothing in exchange for these higher taxes, and the legislation will provide nothing for future generations except more debt and less economic opportunity. According to climatologist Chip Knappenberger, Waxman-Markey would moderate temperatures by only hundredths of a degree in 2050 and no more than two-tenths of a degree at the end of the century.[8] This does not sound like a great deal for the next generation--millions of lost jobs, trillions of lost income, 50-90 percent higher energy prices, and stunning increases in the national debt, all for undetectable changes in world temperature.

The CBO analysis of Waxman-Markey fails to take into account all the adverse effects that will ripple through the U.S. economy if cap and trade becomes law. CBO's grossly underestimated costs means Members of Congress will be grossly misinformed when voting on the legislation.

David W. Kreutzer, Ph.D., is Senior Policy Analyst for Energy Economics and Climate Change, and Karen A. Campbell, Ph.D., is Policy Analyst in Macroeconomics, in the Center for Data Analysis, and Nicolas Loris is a Research Assistant in the Thomas A. Roe Institute for Economic Policy Studies, at The Heritage Foundation.

[TheMercenary]

Liberty or Tyranny? Which is it?

http://www.realclearpolitics.com/vid...d_tyranny.html

[Griff]

Wait a minute, I thought cap and trade was for murder weapon disposal.

[TheMercenary]

hey check out this easy to read chart! It explains how it works.

http://www.uschamber.com/media/pdfs/waxmanmarkey.pdf

The red dots are regulations the federal government will need to promulgate, the blue dots are other mandates. The box in the middle is the administrative review act process that every one of the red dots would have to go through.

[classicman]

Overall, there are a number of basic problems with CBO's analysis:

* Their allowance cost numbers do not add up;
* They ignore economic costs such as the decrease in gross domestic product (GDP) as a result of the bill; and
* The analysis is an accounting analysis, not an economic analysis.

I guess the beancounter mentality is alive and well. :sniggle, snork haggis:

[TheMercenary]

Haggismyassis! After I just read those articles I posted on the Global Warming thread now I am twice as pissed.

http://cellar.org/showthread.php?t=18734&page=17

This one is on the Demoncratic majority in Congress. They are going to bankrupt this country.

[slang]

Originally Posted by Alluvial

You can't really call it a 'tax'.

Why not? Where is the money going? To the Feds? What else might one call this?

"–noun 1. a sum of money demanded by a government for its support or for specific facilities or services, levied upon incomes, property, sales, etc.
2. a burdensome charge, obligation, duty, or demand."

If you support this bill that's fine but let's not be euphemistic; it's a tax.