The game of cap and trade

The U.S. House has passed on to the Senate a cap-and-trade bill to “improve” the environment. Unfortunately, while the bill may ultimately reduce carbon dioxide and other harmful chemicals in the atmosphere, it will only increase costs of goods, including electricity and fuel prices, and cut into the pockets of already struggling Americans and American businesses.

The bill, HR 2454, is the American Clean Energy and Security Act of 2009. The House passed it, narrowly, last week and now it’s the Senate’s turn. I support the goal of the bill – reducing greenhouse gas emissions – as that’s in everyone’s best interest.

Cap and trade, though, is not the way to go. In essence, cap and trade rewards businesses that meet greenhouse gas reduction guidelines while “punishing” those that don’t. The punishment, though, doesn’t work. Company X, which can’t meet the guidelines, can buy “credits” from Company Y, which is below the guideline.

This is good for Company Y, which can recoup some of its investment for meeting the goal by selling the credits or improve its bottom line. Company X, though, must pay to be in compliance with the law. Who’s paying for that? Certainly not Company X, because those fees will be passed along to the consumer. In essence, it’s a business tax and business taxes are never ultimately paid by the businesses.

Top trucking organizations have their own issues with cap and trade. While most would agree we need to improve the environment, cap and trade is not the way to go. If the government wants to set limits, then do that. But don’t turn around and give businesses a chance to postpone those commitments.

Set reasonable goals and enforce them.

With the ability to purchase credits that will not actually harm their business in any way since that cost will be passed along to consumers, business leaders have little incentive to hit target goals quickly. If the government wants to get businesses in line, then hit them where they’ll feel it. Make them hit the goals or truly pay a penalty, one that ultimately could mean the demise of the business. Anytime you give an out, someone will take it.