Cap and Trade Requires Payment of "True Cost"
Cap and trade reflects the “true cost” of using a resource as it includes the cost of cleaning up the environment and disposing of the waste. No one really knows what the cost of a cap-and-trade bill would be – or what the cost would be of doing nothing. Cap-and-trade has worked successfully in the past to reduce acid rain blowing into Canada from Northeast power plants. It cost much, much less than the power companies claimed it would and even less than the government estimated. Structured properly, cap-and-trade could actually be good for many sectors of the economy -including farmers.
For instance, Congressman Frank Lucas (R-OK) wrote in the Daily Oklahoman (6/21/09) that cap-and- trade is a tax and that it would be especially bad for farmers. That isn’t necessarily so. The true cost of using a resource includes the cost of cleaning up the environment and disposing of the waste. Cap and trade isn’t a tax. It is a way of seeing that those who profit from a resource pay the “true cost”. Cap-and-trade would require those who increase pollution to buy credits to do so while those who find ways to decrease pollution would receive credits. This would encourage entrepreneurship and provide the incentive for using our resources wisely.
No one really knows what the cost of a cap-and-trade bill would be – or what the cost would be of doing nothing. There is one claim that it would cost each U.S. household $3,100 a year. That number was arrived at by doing additional math on a Massachusetts Institute of Technology study. However, John Reilly, the MIT economist who authored the study, says that number is wrong and is a misinterpretation of his work. The Congressional Budget Office has estimated the cost to be more like $180 per household with $19 billion in savings to be generated for the economy over the next ten years. There is also the claim that the cost of doing nothing will be higher in the long run because of resource scarcity and environmental damage. Its hard to put a cost on that. Either way, paying the true cost of hydrocarbon use is fair and would create incentives for renewable energy and energy efficiency.
Cap-and-trade has worked successfully in the past. It was used to reduce the U.S. sulfur dioxide emissions that produced acid rain in Canada – and, it turned out to be much less expensive than either the industry or the government predicted. And, after a slow start, the European Union may meet its pollution goals by 2012 by using a cap-and-trade system. In Oklahoma, Western Farmers Electric Co-op has voluntarily used cap-and-trade to offset its carbon emissions by encouraging farming practices that reduced emission. Structured properly, cap-and-trade could actually be good for farmers. Farming practices that reduce energy usage would not only save money but could earn farmers credits that would add to their profit.