PI Original Adam Doster Thursday March 5th, 2009, 9:44am

Roskam's Cap-And-Trade Crusade

After failing to derail President Obama’s popular stimulus package, House Republicans are turning their attention to one of the White House’s next big endeavors: cap-and-trade. Specifically, the caucus is attempting to paint the scheme—which aims to reduce industrial ...

After failing to derail President Obama’s popular stimulus package, House Republicans are turning their attention to one of the White House’s next big endeavors: cap-and-trade. Specifically, the caucus is attempting to paint the scheme—which aims to reduce industrial carbon emissions—as too expensive for both consumers and businesses.

For an example of what this approach looks like, take a listen to these remarks from GOP Rep. Peter Roskam's on WLSDon Wade and Roma yesterday, in which he equates cap-and-trade with a massive tax increase:

Internal mp3

DON WADE: Is there anything that won’t rise in price if we have a cap-and-trade system installed?

ROSKAM: No. I’ve not thought of it that way before Don, but I think you’ve put it really well. Cap-and-trade is something that is going to have an impact on every American and every product that they use or every service that they use. We had a witness—ironically, it was a Democratic witness that was before the Ways and Means Committee last week, Dr. Hansen I believe—who says, “Let’s not call this cap-and-trade, call it what it is: tax-and-trade.” It is a broad tax that is going to run into a lot of opposition I think in the House of Representatives. But you’re right to characterize it that way. It is incredibly sweeping. And I think a lot of folks don’t understand how broad and how wide the implications are.

Roskam’s GOP colleague Rep. John Shimkus used a similar line in January when he said cap-and-trade is little more than a “shell game to hide the cost from the ultimate person who is going to pay.” And there is a kernel of truth to their critique. Initially, low-income households will face higher costs (PDF) for a variety of products and services that rely on carbon inputs. And if designed poorly, cap-and-trade could be quite regressive. But ending the discussion there is insufficient.

A progressive cap-and-trade system should auction (rather than give away) permits for greenhouse gases emissions above the agreed-upon caps. Then, a portion of the revenues should be redistributed to help low- and middle-income Americans pay for any energy price increases. In this scenario, the price of fossil fuels would reflect the heavy externalities currently unaccounted for in the marketplace, the government would generate revenue from polluting companies while lowering the nation’s carbon footprint, and average Americans wouldn’t get socked with the bill.

In the WLS interview, Roskam goes on to make the argument that cap-and-trade would have a “negative drag on our recovery” and is therefore poor macroeconomic policy. What he doesn’t say is that consumers won’t notice any price jumps until roughly 2012, well after the recession will have hopefully ended. Because of the time it takes to set up the regulatory structure necessary for such a venture, there’s even a convincing case that now is the perfect time to enact such policies. Brad Plumer offered his take in December:

As it turns out, a recession isn’t a bad time to get started on climate legislation. Even if Congress raced to pass a cap-and-trade bill in 2009, it would take some time—likely a few years—just to set up a complex new regulatory regime. Moreover, as David Wheeler, a climate-policy expert at the Center for Global Development, points out, an economic slump actually offers a prime opportunity to start trading: If Congress sets the initial economy-wide cap at pre-recession levels, then pollution permits will be exceedingly cheap as long as the economy—and hence energy use—is still shrinking. (Indeed, the downturn in Europe has caused the price of carbon to hit rock-bottom levels.) This would give companies time to learn the system and plan for the future without being assailed right away by high prices.

Of course, while railing against the tyranny of taxes, Roskam makes no reference to that other dire situation faced by not only the country, but the entire globe: environmental destruction. Without addressing climate change in a substantive way now, we run the highly-probable risk of losing much more than a few tax dollars. And when it comes to that question, Roskam certainly doesn’t have any answers.

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