Cap-and-trade crossfire intensifying

Nov. 4, 2010
Like that old poem about the blind men describing the elephant, perspectives on cap and trade seems to depend a great deal on which part of that bulky and various animal is being examined. Some analysts are delighted with what they are feeling, while others sense only tusk-sharp trouble

Like that old poem about the blind men describing the elephant, perspectives on cap and trade seems to depend a great deal on which part of that bulky and various animal is being examined. Some analysts are delighted with what they are feeling, while others sense only tusk-sharp trouble.

According to a new report released this week by the American Council for an Energy-Efficient Economy (ACEEE), for example, U.S. consumers will see a net reduction of $13 billion in 2020 and $46 billion in 2030 in their gasoline expenditures ($100 and $326 in average net savings per household, respectively) if Congress moves ahead to impose a cap-and-trade system.

ACEEE’s report notes that “the lower gasoline expenditures for U.S. consumers will reflect a combination of two factors – a much lower cost per gallon of gasoline for the impact of cap and trade than is claimed by cap-and-trade critics – and major savings made possible through the federal government’s drive for higher vehicle miles per gallon (MPG) performance.”

“You can’t talk about gas price implications of cap and trade without also factoring in the impact of higher MPG standards. The petroleum industry and its allies are sounding the alarm about skyrocketing gasoline prices in the wake of the passage of a strong climate bill,” ACEEE transportation program director, Therese Langer, said.

“We could indeed see high gas prices again soon due to unrelated market circumstances,” Langer continued. “But policies to save energy and reduce emissions are not going to be the cause. In fact, they’re our best protection against that very scenario. The bottom line is that big increases in car and light truck fuel economy standards and new greenhouse gas emissions standards recently proposed jointly by the Department of Transportation and the Environmental Protection Agency will save consumers billions of dollars in fuel expenditures while reducing emissions.”

The report also notes that, to the extent that policies, technological advances and market forces yield a sizeable population of electric-drive vehicles, a cap-and-trade program for greenhouse gases will prove essential to further reductions in transportation sector emissions. Other efficiency measures for the transportation sector, notably heavy truck fuel economy increases and policies to reduce the need for motor vehicle travel, can provide additional emissions reductions and fuel savings.

According to another analysis by Karl Rove, which appeared in Newsweek on the same day, however, cap and trade would be better named ball and chain, for its potentially “ruinous” impact on the American economy. Instead of seeing financial benefits, Rove sees costs and near-fatal consequences.

Problem number one on his list is that the price tag would be huge. “Cap-and-trade would raise prices for the energy we get from natural gas, coal, and oil. Putting a tax on carbon means that every American who flips a light switch, turns a car key, or buys anything made or shipped in this country will pay more,” he wrote. “The Treasury Department estimates that the president's cap-and-trade approach would "generate federal receipts on the order of $100 [billion] to $200 billion annually"; the Congressional Budget Office (CBO) reports that a 15 percent CO2 reduction would cost an average household $1,600 a year. Other experts say the price tag could be much higher.”

Other issues Rove cited include that cap and trade amounts to a regressive tax, which would cost the poor more than the rich, and that cap and trade would drive still more jobs away from America to other countries. “It would require a larger, more intrusive government bureaucracy, regulating vast swatches of our economy and diminishing innovation, flexibility, and enterprise. Businesses would reduce their cap-and-trade costs by moving jobs to countries without a tax on carbon or a cap on greenhouse emissions. Inevitably some companies would win at the expense of competitors,” he wrote.

As the debate over carbon emissions cap and trade heats up, the question remains: Is this the right thing to do? For now, it seems to depend upon what part of the elephant your fingers are considering.

About the Author

Wendy Leavitt

Wendy Leavitt joined Fleet Owner in 1998 after serving as editor-in-chief of Trucking Technology magazine for four years.

She began her career in the trucking industry at Kenworth Truck Company in Kirkland, WA where she spent 16 years—the first five years as safety and compliance manager in the engineering department and more than a decade as the company’s manager of advertising and public relations. She has also worked as a book editor, guided authors through the self-publishing process and operated her own marketing and public relations business.

Wendy has a Masters Degree in English and Art History from Western Washington University, where, as a graduate student, she also taught writing.  

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