Cap-and-trade means energy bubble
By: Tom Borelli, OpEd Contributor
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February 17, 2009
When the housing bubble burst, it exposed an unseemly alliance between special interests and the financial sector. Activists wanted homes for all at any cost, and lenders were happy to oblige despite the inherent risk.
Although the economic devastation this bubble wrought is still not under control, a similar toxic alliance is working on the next one: The green bubble.
Failing companies such as AIG, General Electric and General Motors, already propped up with tax dollars, have partnered with radical environmentalists in a scheme their CEOs believe will allow them to profit on fears about global warming.
Corporate members of the U.S. Climate Action Partnership (USCAP), a coalition of over 30 businesses and environmental groups urging federal regulation to combat global warming, hope to make money through a government-mandated reduction in greenhouse gases system called a “cap-and-trade.”
Emissions such as carbon dioxide would be capped, and companies using more emissions than allotted by the government must purchase credits from other businesses.
USCAP and its cap-and-trade agenda were the focus of a House Energy and Commerce Committee hearing on January 15 — the committee’s first since the more radical Rep.Henry Waxman, D-CA, ousted longtime chairman, Rep. John Dingell, D-MI.
Companies hope to profit from selling their excess emissions credits to businesses with high carbon dioxide emissions, such as coal-based utilities. Companies burdened with purchasing these credits will then pass the added costs to consumers.
Banking on cap-and-trade exposes the myopic vision of these CEOs.
Just as banking CEOs thought real estate prices could only go up, USCAP-affiliated CEOs apparently see scant risk in high energy prices and a massive new bureaucracy. CEOs also think they are building alliances, while their environmentalist “partners” undermine our fossil fuel-based economy.
In reality, cap-and-trade would unleash a series of adverse economic consequences and hardships on the American people:
* A study by the National Association of Manufacturers projected that emissions caps similar to those rejected by the U.S. Senate in 2008 — calling for a 63 percent cut in emissions by 2050 — would reduce U.S. gross domestic product by up to $269 billion and cost 850,000 jobs by 2014.
* A Massachusetts Institute of Technology study concluded cap-and-trade restrictions could raise gasoline prices by 29 percent, electricity prices by 55 percent and natural gas prices by 15 percent by 2015.
* A 2007 report by the bipartisan Congressional Budget Office on the cost of cutting carbon emissions by just 15 percent noted that Americans “would face persistently higher prices for products such as electricity and gasoline. Those price increases would be regressive in that poorer households would bear a larger burden relative to their income than wealthier households would.”
These CEOs don’t seem to realize the impact of cap-and-trade could have on their own companies. At the 2007 shareholder meeting of USCAP member Caterpillar, the world’s largest manufacturer of construction equipment, CEO James Owens confessed he had not conducted a cost-benefit analysis of emissions regulation on his business. If he had, Owens would have learned that cap-and-trade would specifically harm the coal industry — a key Caterpillar customer.
ConocoPhillips CEO James Mulva has also turned a blind eye to the long-term. Under cap and trade, his company’s investment in Canadian oil sands, which release about three times the amount more carbon dioxide than traditional oil, would become more costly.
Furthermore, the Natural Resources Defense Council, a USCAP partner, is currently taking legal action to block the processing of oil sands at a ConocoPhillips refinery.
As cap-and-trade policy raises prices and reduces jobs, America will slip further into economic chaos. Our economy, already reeling from the bursting of one corporate bubble, can’t afford another one.
Tom Borelli, PhD., is director of the Free Enterprise Project at the National Center for Public Policy Research and portfolio manager with the Free Enterprise Action Fund.
