Energy deal clubs Obama tax hopes

Most carbon permits to be free

By Tom LoBianco, The Washington Times, Saturday, May 16, 2009

House Democrats touted a weakened global-warming package Friday, releasing a compromise plan that undercuts President Obama's hopes to raise nearly $650 billion from the climate bill to pay for middle-class tax cuts.

Democrats on the House Energy and Commerce Committee, who have been locked in debate over how to tax carbon-dioxide emissions while protecting American industries, said Friday that their revised plan would give away 85 percent of the plan's carbon permits for free. [full article]

Commentary

This is bill is worse than no bill

I depart from many of my conservative brethren in that I accept the majority opinion of the scientific community that global warming is a reality. This is not a position I came to easily. I started out a skeptic. (If you are interested you can read this post: My Conversion on Global Warming.)

The overwhelming consensus of the scientific community is that global warming is real and is caused by human activity. If I accept that global warming is real then I must also conclude that we must try to do something about it. While I opposed Obama’s candidacy and did not support him for president, I was nevertheless hopeful that he would address the issue of global warming. I was disappointed that George W. Bush and a Republican Congress had ignored it.

If President Obama allows this proposed bill to pass, he will be just as irresponsible as was the previous administration. A revenue-neutral carbon tax would be a much more efficient way to reduce green house gases. Unfortunately, a carbon tax has not gaining traction. In theory, a cap and trade system could have the same effect as a carbon tax, although less efficient and covering less sectors of the economy than a carbon tax. The reason cap and trade could have the same affect as a carbon tax is that it is in effect a hidden tax on carbon. Cap and Trade can only be effective if, like a carbon tax, it imposes a penalty on those who emit carbon and by comparison makes non-carbon-emitting energy less costly.

If credits are given away instead of sold, there is no cost to emitting carbon and no incentive to stop emitting carbon until some distant point in the future if ever. Giving away the credits completely destroys the purpose of having a system of cap and trade in the first place. If we don’t do it right we might as well not do it. If Congress passes this bill then the environmentalist will be off their back and everyone can be happy and can congratulate each other for addressing global warming and then ignore the issue. Passage of this bill will take the issue off the table and lull the public into complacency.

Even where cap and trade was structured with fewer give-away credits, it has been a failure. Countries with caps have failed to meet their carbon cap goals and the carbon credit system has been tainted by scandal. (See: The Great Carbon Bazaar) Even when on paper cap and trade has appeared to reduce carbon output, in reality it has often simply shifted emissions from European countries to Asian countries and the total carbon emissions have not really decreased.

This bill is not a bad bill because it does not raise revenue; it is a bad bill because it will not reduce carbon emissions. I hope Obama rejects this bill and tells Congress to present him with a bill that will actually do something.

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