‘Cap and trade’ would be a disaster
After months of debate and speculation, the U.S. House of Representatives passed the American Clean Energy and Security Act (also known as the Waxman-Markey Bill) on June 26 with a meager seven-vote advantage. The bill has now moved to the Senate, where it will undergo further revisions before going to the floor later this year. This bill can certainly be called “historic,” but for the wrong reasons.
There is no doubt that the provisions contained within the 1,200-page Waxman-Markey Bill will have a measurable impact on the American economy. The bill’s proponents laud it as a measure to transform the way we use energy, while creating jobs to spur an economic recovery. While these are certainly admirable goals, achieving them will cost billions of dollars, and American consumers will ultimately foot the bill. Current proposals for a government auction of carbon allowances under a cap-and-trade program basically represent an energy tax on consumers designed to transfer wealth and provide funding for government spending. Making energy substantially more expensive would be a regressive tax on the poorest Americans, slowing economic growth and our economy as a whole.
The complex legislation is not aimed solely at the electricity sector — its provisions affect all carbon-emitting sources, including the automotive industry, manufacturers, gasoline and natural gas production, and all other uses of fossil fuels. My concern is the affordability, availability and reliability of electric energy when the bill’s mandates are in effect.
The bill essentially establishes a cap-and-trade system for carbon dioxide emissions, in which those that emit carbon dioxide must own one “credit” for every ton of carbon dioxide. Each entity will receive a share of allowances, and any emissions above the established limits (the “cap”) will require the purchase (or “trade”) of allowances from another entity or even the open market.
By 2012, PowerSouth would need to purchase 2.7 million carbon dioxide credits, and estimates are that the credits will be $20 each, which translates into an additional $54 million burden for our members.
Even the bill’s supporters concede that it will cause electricity costs to skyrocket, yet the bill’s subsidies don’t make up for the price increase consumers would face. For consumers served by PowerSouth’s member cooperatives, the passage of the Waxman-Markey Bill in its current state could mean a 6.78 percent increase in monthly power bills beginning in 2012.
Electric utilities are not the bill’s only opponents. The United States Chamber of Commerce urged lawmakers to vote against Waxman-Markey, citing the immense negative economic impact on American consumers.
The bill’s most zealous supporters are from urban areas that aren’t affected as much as those from rural areas like ours. A recent study by the Nuclear Energy Institute found that consumers in the Southeast could experience a 41 percent increase in their monthly power bills as a result of Waxman-Markey, compared to 9 percent in California. Interestingly enough, California is home to House Speaker Nancy Pelosi and Rep. Henry Waxman, two of the bill’s most vehement supporters.
As the bill continues to drive forward through the Senate, we urge lawmakers to weigh the facts of the bill’s financial implications against the theories of global warming. While energy is a very important issue, there is no reason to put the economy at risk and put an additional financial burden on our consumers, especially during a recession. PowerSouth will continue to stress affordability, reliability and the need for fair allocation of emission allowances to electric cooperatives. PowerSouth supports responsible, effective policies that balance environmental benefits with compliance costs and economic impact.