Cap and trade, simply put, is the process by which a central authority sets a limit or cap on the amount of a pollutants that can be discharged. Industries and manufacturers receive a certain number of allowances or credits, through permits, which allow them to emit a specific amount of these pollutants. If a company is successful in remaining below the standard set up by central planners, they would be allowed to sell their remaining credits to businesses who pollute more. In effect, a company who goes above the standards is penalized through a charge for polluting, while industries which comply are being rewarded for having reduced emissions by being able to sell their credits to violators.
One of the major issues of cap and trade will be the ancillary costs that trickle down to the average American and their families. By selling allowances to firms which operate in industries that are subject CO2 capping there will be an inevitable increase on energy intensive items such as electricity, home heating, natural gas, fuel, etc. Also, cost rises in these areas will certainly have a roll over effect to non-energy intensive industries which rely on energy input for manufacturing, distribution, and transportation. Instead of the these firms solely bearing the brunt of an increase in operating expenditures brought on by cap and trade, they will pass them on to consumers.
Recently, Terry M. Dinan, a senior analyst at the Congressional Budgetary Office, testified before the House Subcommittee on Income Security and Family Support about the implications cap and trade would have on average to low income Americans.
The price increases caused by a cap-and-trade program would impose additional costs on households. For example, without incorporating any benefits to households from lessening climate change, CBO estimates that the price increases resulting from a 15 percent cut in CO2 emissions could cost the average household roughly $1,600 (in 2006 dollars), ranging from nearly $700 in additional costs for the average household in the lowest one-fifth (quintile) of all households arrayed by income, to about $2,200 for the average household in the highest quintile.
In its testimony the CBO offered a wide range of solutions to offset the increased costs being passed on to consumers. For example, Reductions in Income Tax Rates, Payroll Tax Rebates, Income Tax Rebates, Increased EITC Payments, Supplement to SNAP Benefits, etc. While the markets determine who is bearing the cost, central planners and policy makers will determine who will benefit from these solutions.
Although the price increases triggered by a cap-and-trade program for CO2 emissions would have a greater impact, relative to income, on lower-income households, the program’s ultimate distributional effect would depend on policymakers’ decisions about how to allocate the emission allowances.
The Central Planner-and-Chief has offered green tech and renewable energy sources as the only major road for economic revival in our country. While this is a glaring error which is wholeheartedly untrue, people should not discount the fantastic opportunity and potential offered by developing these technologies.
Within the renewable energies and green tech their exists a vast untapped market potential for profit. Instead of burdening industries with tyrannical government controls that are inevitably paid for by consumers why our despotic central planners do not use a free market initiatives to direct firms to reduce green house gas emissions is quizzical. Incentives such as a major reduction in corporate taxes could be offered for firms participating in research, development, and implementation of environmental controls, thus creating an environment of competition and imagination.
From the George C. Marshall Institute,
Since 1990, the U.S. has spent heavily on research on climate change, and on research and development of new energy efficiency and energy production technologies. It has promoted an important new international agreement to restrain growth in GHGs.
Domestically, it has instituted a wide variety of public-private partnerships and other programs to spur GHG reductions. This combination of policies, coupled with private sector actions to economize the use of energy, is responsible for the record of reduction in GHG intensity to date and for foreseeable continued improvement in the future.
By forcing these insane regulatory laws upon businesses and corporations nothing is being accomplished except a crippling effect on our economy. Relegating more control into the hands of a few power brokers on the Hill. Their obliviousness to the damage they will wreak on the average consumer is further evidence that their lust for power and dominance is what is driving their agendas.
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