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Treasury Memo Resets Cap and Trade Energy Tax Debate

Written by Larry Greenley on September 18 2009.

Although health care reform is still the main obsession of President Obama, Congress, and a huge number of Americans, a months-old Treasury Department memo that has been pried loose through a Freedom of Information request is rekindling the debate over cap and trade legislation. This memo, which was written sometime after President Obama's address to a joint session of Congress on February, 24, 2009, states:

[G]iven the Administration's proposal to auction all emission allowances, a cap-and-trade program could generate federal receipts on the order of $100 to $200 billion annually.

By my calculation assuming there are 117 million American households (116.7 million in 2008 per the Census Bureau), at the upper end of this estimate the cost of these cap and trade energy taxes would be about $1700 per American household per year. This is in line with a widely quoted article on this topic, which has calculated the annual cost to be $1761. Of course, the defenders of cap and trade came out of the woodwork to complain that this "months-old memo" doesn't take a couple of factors into account. First, the House cap-and-trade bill (H.R. 2454) is based on the government giving away most of the initial carbon pollution permits and second, there would also be an extensive rebate program to compensate some portion of consumers for the higher energy costs induced by cap-and-trade.

Of course, these apologists for cap and trade are merely serving to remind us of the deceptions that were used to get the House to pass its cap and trade bill in the first place. By promising to give most of the pollution permits away for free to industry in the startup of this new program, and by promising to compensate a large portion of consumers for their higher energy costs due to cap and trade, the Obama administration and congressional leaders were able to point to a Congressional Budget Office analysis which stated that their cap and trade bill would only cost Americans $175 per household annually by the year 2020. Here's an excerpt from the CBO analysis:

Reducing emissions to the level required by the cap would be accomplished mainly by stemming demand for carbon-based energy by increasing its price. Those higher prices, in turn, would reduce households’ purchasing power. At the same time, the distribution of emission allowances would improve households’ financial situation. The net financial impact of the program on households in different income brackets would depend in large part on how many allowances were sold (versus given away), how the free allowances were allocated, and how any proceeds from selling allowances were used. That net impact would reflect both the added costs that households experienced because of higher prices and the share of the allowance value that they received in the form of benefit payments, rebates, tax decreases or credits, wages, and returns on their investments.

So cap and trade was sold to Americans back in June as a way of fighting global warming by increasing the costs of carbon-based energy usage so radically that both American industry and consumers would be forced to begin using alternate energy sources. However, an annual cost per household of up to $1700 dollars as projected by the Treasury Department and others would have meant the cap and trade bill could not be passed by Congress. So, the cost had to be reduced by promising to give away pollution permits (initially) and promising that the government would compensate large numbers of consumers for their increased energy costs. So this was quite a balancing act. The increased energy costs had to be high enough to force Americans to adopt new energy sources, but not so high that Congress couldn't pass the cap and trade bill.

And, of course, first things first. The cost must appear to be so low that the initial bill could be passed and the cap and trade pollution allowance marketplace established. Once the new energy taxation regime was in place, it could be tweaked at will by the federal government to destroy any carbon-based energy company it placed in its crosshairs.

And that brings us back to the Treasury Department memo. It has inconveniently (for the administration) restarted the whole debate over the real cost of the cap and trade legislation before the deal could be sealed by Senate passage of a cap and trade bill. This is where you come in. The House narrowly passed its cap and trade bill, H.R. 2454, by 219 to 212 on June 26. The Senate hasn't passed a cap and trade bill yet. And, of course, the health care debate is slowing down its timetable for considering cap and trade. However, Senate Environment and Public Works Committee Chairwoman Barbara Boxer (D-Calif.) is expected to start legislative hearings on cap and trade the week of October 5. This means that a vote on a cap and trade bill by the full Senate could occur as early as late October, but more likely in November or December.

Contact your senators now in strong opposition to any cap and trade bill. Don't listen to their assurances that the cost will be minimal. The whole point of cap and trade is to make carbon-based energy so expensive that we'll be forced to adopt new energy sources. It's ridiculous. All of this turmoil in order to reduce man-made global warming, a completely unproven theory. Energy prices are already going up for a variety of reasons. Let's not allow our government to force prices up still more through an economy-killer such as cap and trade.

An excellent article, "Cap and Trade," has just been published by The New American magazine in its September 28th issue. This article gives you the details for the increased energy costs we could expect from a cap and trade energy tax regime. It also provides you with an excellent tool for activating others to oppose Senate passage of a cap and trade bill. And, of course, you can send a link to the article to your senators to give them an opportunity to learn about the numerous downsides to cap and trade.

Here's another excellent article about cap and trade, "Mr. Obama, Tear Down This Wall!" by Arthur Robinson, which was published in the September 1 issue of Environment and Climate News. Here's an excerpt:

Free enterprise built our energy industries, and only free enterprise can build the new energy capacity we need. It cannot do this, however, unless the enormous burden of taxation, regulation, and litigation (and subsidies of favored industries) Washington has placed on the backs of American workers is removed, not increased by the additional oppression of “cap and trade.”

There is no resource problem. The United States is awash in essentially unlimited quantities of all the fuels—uranium, coal, oil, natural gas, and methane clathrates—these industries require. The Obama administration and its congressional retainers insist, however, that these fuels not be used.

What's needed is an expansion of the anti-health-care-reform fervor to the cap and trade battle. Based on what we've seen the past couple months, I'm betting Senate passage of cap and trade will be no cake walk.

One last thing. I got so caught up in the huge costs of cap and trade that I completely forgot to say it's totally unconstitutional. We must bring our government back under the discipline of the Constitution or we can just kiss our freedom good-bye.

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