30 September 2009

Cap and Trade-A Federal Leviathan

Not Everyone Won the Cap and Trade Lobbying Battle

The cap and trade bill introduced by Henry Waxman (D-CA) and Edward Markey (D-MA) and passed in the House is 1,427 pages and includes much more than a cap and trade system to reduce carbon dioxide and other greenhouse gas emissions. We’ve been detailing these economically harmful provisions in our cap and trade calamities, but Kathleen Hartnett White at the Texas Public Policy Foundation provides a tremendous synopsis of the entire bill and asks many tough questions in her policy paper, A Federal Leviathan: The American Clean Energy and Security Act of 2009.

One particularly revealing part of the paper is the graph on the bottom of page three. Approximately 2,340 energy lobbyists worked on the cap-and-trade bill to do what President Obama said we shouldn’t – hand out allowances costs to utilities and other industries direct revenue to them. Opposition to this huge energy tax bill wheeling, dealing and arm-twisting to eke out the narrowest of majorities. They promised generous handouts for various industries and special interests but not everyone came out winners. The blue indicates the emissions by industry and the red indicates the allowances allocated by the government.

As shown by the graph, the refining and petroleum products industry, responsible for much of the carbon emissions from energy, receive the very little allowance allocations. White writes,
“Under the aggressive carbon caps, many U.S. industries could not compete with foreign products manufactured in countries without binding carbon limits. And increased import of goods manufactured elsewhere without carbon limits would
increase global carbon emissions. To address this “carbon leakage,” the bill provides for “carbon emission allowance rebates” to industries which meet specified levels of “trade intensity” or “energy intensity.” Petroleum refining, oddly, is excluded from those eligible.”
The other loser is, of course, me and you. The disguised energy tax will cost a family of four an additional $3,000 per year. When all the tax impacts have been added up, we find that the average per-family-of-four costs rise by almost $3,000 per year. In the year 2035 alone, the tax impact is $4,600. And if you add up the costs per family for the whole energy tax aggregated from 2012 to 2035, the years in which we modeled the bill, it’s about $71,500.

Giving away allowances are not an exception to the “no free lunches” adage. Giving away allowances does not lower the costs of cap and trade; it merely shifts the costs around.
Waxman-Markey is Robin Hood in reverse: it takes a lot of money from regular Americans and funnels it to Washington bureaucrats and the corporations with the best lobbyists.

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