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June 26th, 2009

Latham: Cap-and-trade will tax your lights out

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Written by: The Iowa Republican
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lathamBy Iowa Congressman Tom Latham
Iowa’s 4th Congressional District

The U.S. House of Representatives is rushing toward a vote on the more than 1,200-page cap-and-trade energy proposal, a piece of legislation that will have very far-reaching and unknown negative consequences, including the potential to cause significant financial pain for every household, farmer and small business owner in America.

There is no question that we must work together to pursue comprehensive long-term common sense solutions that protect the environment without economically crippling hardworking American families. The cap-and-trade bill being pushed through Congress by House Speaker Nancy Pelosi (CA) is misguided and will do nothing to actually protect our planet and has every possibility of punishing the back pockets of every American who turns on a light switch. I have opposed the cap-and-trade proposal from the outset, and I want you to know that I will do everything I can to stop this misguided policy from becoming law.

The U.S. House version of cap-and trade (the “Waxman-Markey” energy legislation) seeks to limit greenhouse gas emissions on the part of businesses by establishing a scheme under which a government carbon emissions cap is set. Businesses would then buy and sell ‘permits,’ or pollution credits, that allow them to emit certain levels of CO2. A business can either use permits/credits to discharge a level of CO2, or it can sell its permits/credits to other businesses that need extra permits. In essence, this legislation creates an energy rationing system that will cause energy to become more expensive and lead to higher costs of production that will be passed on to hardworking consumers. This eventually will weaken the overall economy and raise prices for many goods and services.

One of the close-to-home impacts for households will be electricity rates as utility companies will face additional costs to produce energy as a result of cap-and-trade. These costs will then be passed along to consumers in the form of higher rates. At a time when we are trying to climb out of a terrible recession, a cap-and-trade policy will raise energy bills for families, farms and small businesses. The policy will be especially painful in Iowa because of the state’s dependence on coal as an energy source. Major utility companies in Iowa have estimated that energy bills could go up as much as 25 percent due to cap-and-trade. Americans are already straining to make ends meet, and cap-and-trade will pile yet another tax on everybody.

The cap-and-trade proposal also puts America at a competitive disadvantage in the world economy because other countries, particularly China and India, have no reason to impose similar caps on emissions. One of the reasons that these countries will not impose emission caps is that they are continuing to invest in energy production facilities, such as coal plants and refineries. The last thing these countries want to do is impose emissions caps on their producers and populations. After all, they need to recoup the costs of these facilities, upon which they rely for economic development as they climb out of the recession.

In addition, the United States currently has the second highest corporate tax rate in the world. As such, the cap-and-trade proposal could provide further incentive for employers to relocate from the United States to places such as China or India, where energy and environmental regulations are not as stringent. If cap-and-trade becomes law, Congress will enhance the chances that American jobs will be sent overseas in a nicely-wrapped package.

The proponents of cap-and-trade argue that this legislation is necessary to slow global climate change, but recent studies have shown that the policy will have only a minor impact on the environment. The proposed reduction in emissions would slow warming by only a small fraction of a degree by the year 2050, according to some predictions.

The environmental impact of cap-and-trade is difficult to measure, but the economic damage it can cause has become quite evident in Europe, where a similar cap-and-trade system has been operating for about three years. The results: the system has largely failed and the price of utilities in the average household has risen. For example, reports have shown that German household electricity rates climbed by 25% under the European cap-and-trade scheme. Manufacturers often shut down production for part of the day to save money, losing environmental efficiencies in the process.

In an effort to protect the economic well-being of American families, farmers and small businesses, I have authored an amendment that, if accepted, would kill the cap-and-trade scheme if it is determined that it increases the cost of energy for consumers or small businesses anywhere in the country. My amendment would provide an economic insurance policy that would repeal cap-and-trade if it has a negative impact on consumers, farmers or job-creating businesses. Adding the measure to the bill would protect America from the disastrous effects that so many expect this bill to cause.

Throughout my tenure in Congress, I have pushed for comprehensive energy reform that puts the American people first. Rather than create tax schemes that target every American who flips a light switch or puts gas in a car, we need to invest in an all-of-the-above approach to energy that embraces conservation and efficiency as well as renewable fuels, nuclear energy and expanded energy exploration in this country. We must implement a comprehensive approach to strengthen America’s energy foundation while also protecting the environment. We can meet these goals without levying a massive energy tax on the American people. Cap-and-trade falls far short of that ideal. Make no mistake, it is a massive energy tax.


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