Climate Change and What It Will Cost You

It’s official, the House has just passed the largest tax increase in American history! Late last week the House passed a landmark monstrosity of a bill to create a cap and trade system for carbon emissions in the U.S. The bill was passed by a very narrow 219-212 according to Fox News. The bill calls for substantial reductions in CO₂ emissions and will impact virtually every sector and industry in the nation. It will regulate the emissions of power plants, steel plants, refineries, even farms and livestock production. The bill will require companies to have permits to emit greenhouse gases like CO₂. The number of permits will be set by the government and initially 85% will be given away to companies and 15% will be auctioned off (more on this later). The companies that hold these permits will get a right to emit a certain volume of greenhouse gas, if they do not use it all they can sell those rights to other companies that need them. Every year the government will reduce the volume gradually until we hit 80% below 2005 levels of emission by 2050.

The kicker here is that because the initial amount is immediately below current emissions companies will either have to buy permits to emit or invest in clean technology. Both of which will add cost to the services they perform, cost they will pass on to their customers. Even if a company commits to clean technology they will have to buy permits for some time since these projects typically can take years to complete. This will mean that consumers will face higher prices for electricity, natural gas, propane, gasoline, and even some food products. According to the Fox News article the CBO estimated that this will cost consumers about $175 a year initially in added costs for various services. Over time these costs will filter through and if the decreases in the permitted emission volume outpace the advance of clean technology then these costs will increase dramatically. The Wall Street Journal also has an interesting article about this bill.

This bill will insert government regulation into virtually every aspect of our economy. The bill’s impact won’t even be evenly distributed across the nation. Coastal states and states with a lot of hydro-electric or nuclear power sources will not see as large of an impact. Also, states that specialize in knowledge or white-collar industries (think computers and medicine) will not be hit as hard – these tend to be coastal states too. In the Mid-West, South-West, Appalachian States, and Texas where the industries are concentrated in agriculture, heavy industry, manufacture, and oil and gas and where electricity is primarily from coal or natural gas the impact will be much worse. This tax will fall disproportionately hard on the states that by and large are the hardest hit by the changing landscape of our economy. Not to mention the fact that this will put our manufacturers at a competitive disadvantage to those in countries without such regulation, like China, India, Vietnam, and Korea.

This will have profound impact on how long it takes us to get out of this recession and also on how fast our economy grows afterward. The result will be a slowing growing economy, a poorer citizenry, and sharply higher energy costs. Luckily it is not certain that it will pass the Senate, so call your Senator and let him/her know what you think. If you want to read more click on the links below:

-Lonely Conservative “Climate Bill Defies Economics.”

-Fox News “House GOP Warns…”