View all Articles
Commentary By Max Schulz

Behind the Cap-and-Trade Curtain

The secret economics of the Democrats’ environmental plan.

Proponents of a cap-and-trade program to combat global warming face an uphill fight. For all their attempts to spin it as a solely environmental issue about saving the planet from extinction, the reality is that it’s a political question that ultimately comes down to economic tradeoffs.

That reality explains why a cap-and-trade proposal similar to the one presently being considered crashed and burned in Washington last year, despite Democratic majorities in both houses of Congress. Voters got a sense that a new regulatory regime to limit carbon-dioxide emissions would impose huge costs across the economy, and they let their representatives know that was unacceptable.

The irony is that the Democrats beating the drums for a global-warming bill understand — and even embrace — the economics of carbon-dioxide regulation. In an exceptionally candid interview with the San Francisco Chronicle editorial board last year, then-senator Barack Obama talked about bankrupting the coal industry and said, “Under my plan of a cap and trade system, electricity rates would necessarily skyrocket.” Raise the price of coal- and petroleum-based energy so people use less, or force consumers to employ energy technologies that cost vastly more. Either way, higher prices are inherent to cutting emissions.

But these proponents also know that the economics of the issue must be obscured at all costs if they want the public to swallow a massive new regulatory scheme on the scale of cap and trade. And so the debate put forth by most influential advocates of global-warming regulation hinges on willful distortions of basic truths and insidious inversions of language that would make George Orwell blush.

The best example is the move to term carbon dioxide a pollutant. “Pollution” traditionally has described things that dirty the environment. In its roundabout global-warming calculus, the Left calls CO2 pollution not because the plant-feeding trace gas is dirty — it’s not, of course — but because they want to suggest that it must be regulated in the same way that real pollution — like sulfur dioxide and lead — is regulated. But the ecological disasters that we are promised will surely follow from higher atmospheric concentrations of CO2 are at present only the stuff of conjecture and theoretical models.

This campaign scored a victory in 2007 when a bitterly divided Supreme Court ruled, in Mass. v. EPA, that the Environmental Protection Agency could regulate CO2 as a pollutant under the terms of the Clean Air Act. Under the majority’s reasoning, Massachusetts was allowed standing in the case under the notion that the coastal state is at risk from rising sea levels, even if it has yet to suffer harm. However dubious the rationale, the Supremes’ decision to put CO2 on the same plane as pollutants that actually make the air filthy is far-reaching. A recent EPA determination based on that decision moves the regulatory wheels down the track and gives impetus to the calls for legislation.

Another example of taking green liberties with language is the term “cap and trade” itself. “Trade” implies that market mechanisms, and not government’s heavy hand, will be brought to bear on the supposed problem. Don’t believe it. Cap and trade is the wolf in sheep’s clothing of economic regulation. It claims a mantle of market respectability to foist the worst elements of bureaucracy, government, and mandates on unsuspecting consumers. Want to limit carbon emissions? The only honest way would be to put a direct tax on them. Cap and trade is a tax hike tarted up to look like the market at work.

Finally, President Obama touts the supposed economic benefits — green jobs and prosperity — that will accompany his regulatory regime. It is true that, due to government policies that mandate the use of renewable energy, jobs will be created to build wind turbines and install solar panels. But the far higher energy costs throughout the economy associated with these unreliable energy sources will kill jobs and make Americans poorer.

Obama told an audience in Iowa on Earth Day that “the choice we face is not between saving our environment and saving our economy. It’s a choice between prosperity and decline.” If it’s true that this is the only trade-off we face, one wonders which option he prefers. After all, his energy proposals will increase the cost of energy, inflicting pain on every sector of our economy.

Obama knows this, as his unguarded remarks last year suggest. Pain is the necessary cost of “transforming” our energy economy. Trouble is, you can’t let the voters know it.

This piece originally appeared in National Review Online

This piece originally appeared in National Review Online