By Ronald Bailey,Reason Magazine
Power Plants will become major source of Government Revenue under Cap and Trade Scheme
Last month,leading Congressional climateer,Rep. Henry Waxman (D-Calif.),chair of the House Energy and Commerce Committee,pushed out a sweeping 1000-page bill that aims to dramatically reshape how Americans will use energy in the 21st century. At the heart of the American Clean Energy and Security (ACES) Act is a cap-and-trade proposal for limiting the emissions of carbon dioxide by American industry and consumers. Carbon dioxide,produced by burning fossil fuels and chopping down forests,is building up in the atmosphere where it is thought be the chief cause of man-made global warming.
The ACES Act would establish an artificial carbon market by setting a limit on the amount of greenhouse gases that can be emitted each year. Beginning in 2012,a national cap—or total maximum CO2 emissions—would be set and then ratcheted downward annually. Under ACES,the U.S. would emit 17 percent less carbon dioxide in 2020 than it did in 2005,eventually falling to 83 percent less than emitted in 2005 by 2050.
Electric and gas utilities,cement plants,steel foundries,and other companies would be required to have one emissions permit for every ton of CO2 discharged from their smoke stacks. Under a cap-and-trade scheme,emissions permits can be allocated and/or auctioned up to the set cap. Once allocated,the market allows companies emitting less than their quota to sell their excess permits to emitters needing to buy extra to meet their cap. This process sets a price on each ton of carbon dioxide.
The central fact of the cap-and-trade proposal is that it will increase the price of energy. If energy prices don’t go up,the goal of getting energy producers,manufacturers,and consumers to shift away from carbon generating fuels (coal,oil,and natural gas) toward low-carbon sources of energy (nuclear,solar,wind,conservation) will not be achieved.