Tax Dodge: Cap-and-Trade Would Harm Consumers – and the Oil Industry

Last week former Vice-President Al Gore trekked to Capital Hill – presumably in a fossil-fueled private jet – to express his support for a cap-and-trade energy bill that would penalize companies and individuals who use fossil fuels like oil, natural gas, and coal.

You’ve got to hand it to Mr. Gore – he’s turned a $2 million income after he left Washington to a $100 million windfall through his business interests.

Like an oilman who hits a sweet spot, Mr. Gore has found his capitalist niche and fully exploited it. I don’t agree with his particularly aggressive brand of climate alarmism but it’s a free country and he’s out to make money and, in his mind, make the world a better place. Nothing wrong with that.

That said, I do have a major problem with his new energy proposal, backed by President Obama and many Congressional Democrats, that would create the “cap and trade” law. Quite simply, it would both trigger an onerous tax on businesses and individuals at the worst possible time, with the economy in legitimate peril. Plus, there’s no evidence that a cap-and-trade law would cut greenhouse gases. It certainly hasn’t in Europe – similar laws there have not decreased carbon emissions but they have proved costly to business and consumers in terms of energy bills and bureaucratic red tape for companies looking to grow their businesses.

Interestingly, one key Congressional Democrat who has a lot to say about the passage of any cap-and-trade bill - Rep. John Dingell (D-Mich.), the former chairman of the Energy and Commerce Committee –called out Mr. Gore during his testimony. “Nobody in this country realizes that cap and trade is a tax and it’s a great big one,” said Rep. Dingell.

Congressional Republicans pounced on the comment, saying essentially if it walks like a duck, talks like a duck, and acts like a duck – it’s a duck. Matt Lloyd, spokesman for House Republican Conference Chairman Mike Pence, said as much: "Chairman Dingell agrees with what Republicans have been saying all along: the Democrat cap and trade bill is a national energy tax on working families.”

Pence estimates that the average American’s energy bill would rise 50% with a cap-and-trade tax. Plus, millions of jobs would be lost – many of them in the already suffering oil and gas industry.

That’s not the only impact a cap-and-trade tax would have on the energy industry. Red Cavaney, senior vice president for government, public affairs at ConocoPhillips, also testified in front of the US House Energy and Commerce Committee. He said, quite accurately, that refineries would have to spend an estimated $68 billion under a $25/ton carbon tax, mostly from collections of end-users' carbon taxes in addition to levies on refiners' greenhouse gases under the measure.

As much as an onerous cap-and-trade bill would hurt the oil industry, it would hurt consumers even more – and not just in higher energy bills. As Cavaney explains, oil companies will have to figure out how to cope with higher taxes and fees, and that could mean passing larger costs along to customers. "It is vital that the mechanisms for allowance allocation to trade-exposed energy-intensive industries are applied fairly and in a way that comprehends the fundamentals of how these markets work,” he told the committee. “We are deeply concerned about our ability to fully pass on these costs of compliance and the potential implications that even a small percentage of unrecoverable costs could have on what is historically a low-margin business," he testified.

All in all, cap-and-trade is a terrible idea, and a Trojan Horse of a tax that will hurt individuals and businesses. As said Rep. Roy Blunt (R-Mo.), the timing alone makes cap-and-trade a big mistake. "Every credible study I've seen tells me that a cap-and-trade program will increase the cost of energy and hurt businesses and consumers throughout the US. I doubt there's ever a good time to burden American consumers with extra costs, but I believe that now is probably the worst time to implement an energy program that will pass the costs directly to the consumer every time we flip on a light switch, turn up the thermostat, fill up our [gasoline] tank or purchase an American-made product.”

It’s time to stop the insanity. The more people know about cap-and-trade, the less they like it. So make your voice heard and tell your families and friends, and contract your Congressional Representatives.

It’s high time that we put a “cap” on cap-and-trade.

Posted 04-30-2009 7:19 PM by Bret Boteler


Chris Baker wrote re: Tax Dodge: Cap-and-Trade Would Harm Consumers – and the Oil Industry
on 05-09-2009 1:14 AM

Everything you say about cap and trade is correct, but you don't address the underlying question - should the US (and the world) seek to reduce greenhouse gas emissions and, if so, how?