Why 'cap-and-trade' is a carbon tax

This is the second of several excerpts exclusive to WND from WND senior staff reporter Jerome R. Corsi's new book "America for Sale: Fighting the New World Order, Surviving a Global Depression, and Preserving USA Sovereignty."

A cap-and-trade emissions-control scheme is only necessary to impose on the U.S. economy if global warming and climate change can be attributed to human activity by irrefutable scientific evidence. Otherwise, what amounts to a significant drag on the U.S. economy should be avoided.

The concept advanced by the Obama administration is similar to the cap-and-trade program introduced in the Clean Air Act of 1990 to reduce sulfur emissions that cause acid rain. The idea derived from global-warming activists' aims at reducing the greenhouse-gas emissions, and most particularly the carbon-dioxide emissions, a company is allowed to make.

The "cap" is the enforceable maximum limit of greenhouse gases a particular company will be allowed to emit. Under the assumption that it will be easier for some companies to reduce their greenhouse emissions than other companies, a cap-and-trade system allows companies that are able to reduce their greenhouse emissions below their allowance to sell their extra permits to companies having a more difficult time reducing their emissions.

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If the federal government auctions the emissions permits to the companies struggling to reduce emissions, a revenue stream is created for the U.S. Treasury. A goal might be to reduce carbon emissions by U.S. companies to 80 percent of some specific target level, perhaps the 1990 level of U.S. carbon emissions, by the year 2050.

Economist Peter Orszag, currently the director of the Office of Management and Budget in the Obama administration, testified before Congress on cap-and-trade last year, when he was the director of the Congressional Budget Office. From his testimony, it was clear Orszag believed global climate change resulting from human causes was a serious, perhaps even catastrophic, problem.

"Human activities are producing increasingly large quantities of greenhouse gases, particularly CO2," he testified. "The accumulation of these gases in the atmosphere is expected to have potentially serious and costly effects on regional climates throughout the world."

Admitting that a cap-and-trade program amounts to a "carbon tax," Orszag argued that cap-and-trade was a "market-oriented" approach to reducing carbon emissions that would be more efficient in reducing carbon-dioxide emissions than a "command-and-control" approach as typified in a system of government regulations that would require across-the-board emission reductions by all firms.

Orszag estimated a cap-and-trade emissions program could generate as much as $145 billion a year in revenue for the federal government. Acknowledging that the cap-and-trade program would function as a tax that corporations would most likely pass on to consumers in the form of higher prices, Orszag testified "price increases would be essential to the success of a cap-and trade program, because they would be the most important mechanisms through which businesses and households would be encouraged to make investments and behavioral changes that reduced CO2 emissions."

Whenever the government creates a scarce resource, in this case the right to emit carbon, and then mandates that businesses buy or trade permits, costs are inevitably passed on to all consumers in the form of higher prices. Congressional Budget Office estimates suggest price hikes from a 15-percent decrease in emissions would cost the average family in the bottom-fifth of income earners about 3.3 percent of its after-tax income every year.

The impact scales up, until the top-fifth of income earners would pay a 1.7-percent tax for a 15-percent reduction in emissions. That all income earners, even those in the bottom 20 percent, would be impacted by the higher prices resulting from the cap-and-trade permit system belies President Obama's frequent promise that planned administration tax increases would not raise taxes for 95 percent of working families.

Critics point out cap-and-trade will increase gasoline prices and the cost of energy in the 25 states that get more than 50 percent of their electricity from coal. Businesses that emit carbon dioxide, including manufacturing companies, will face yet one more cost of operations in paying cap-and-trade costs, at a time the businesses are trying to compete in a global economy where multinational corporations are free to outsource operations to cheap labor countries, such as China, that appear to have no intention of implementing cap-and-trade emission schemes on companies operating within their boundaries.

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Moreover, the imposition of what well may amount to a cap-and-trade tax may further depress the economy, at a time when families are struggling just to keep jobs, not lose homes and pay monthly living expenses, including those involved in raising children. Proponents of cap-and-trade schemes typically assume the economic costs of what they perceive as the "climate-change catastrophe" produced by man-made carbon-dioxide emissions far outweigh the economic cost of the scheme itself.

As Congress prepared to take up the cap-and-trade debate as part of the Obama administration's proposed $3.7 trillion federal budget for 2009, Senate staffers who were briefed by the White House were told the cap-and-trade legislation could amount to as much as a $2 trillion tax over the next eight years, considerably more than the $646 billion the White House had estimated to the public that the program would raise in that time.

"The last thing we need is a massive tax increase in a recession, but reportedly that's what the White House is offering: up to $1.9 trillion in tax hikes on every single American who drives a car, turns on a light switch or buys a product made in the United States," Michael Steel, a spokesman for House Minority Leader John A. Boehner, R-Ohio, told the Washington Times. "And since this energy tax won't affect manufacturers in Mexico, India and China, it will do nothing but drive American jobs overseas."