J.C. Moore Online
Current Events from a Science Perspective

Posts Tagged ‘entrepreneurship’

Cap and Trade Requires Paying “True Cost”

Mon ,16/11/2009


Many of our Legislators have  expressed the idea that cap-and-trade is a tax that would be expensive and hurt the economy, particularly farming.  That isn’t necessarily so. The “true cost”  of a resource includes not only the price but also the cost of cleaning up the environment and disposing of the waste. Cap-and-trade is a way of seeing  that those who  use or profit from a resource pay the “true cost”.  It would require those who increase pollution to buy credits to do so while those who find ways to decrease pollution would receive credits. That encourages entrepreneurship and provides incentives for using our resources wisely. Structured properly, cap-and-trade would actually be good for many sectors of the economy.

 There have been many esimates of the cost of a cap-and-trade bill.  There is one false claim that it would cost each U.S. household $3,100 a year. That number was arrived at by doing some creative 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. More recent EPA estimates are that it would cost an average of about $140 per household anually.  Then, there is also the claim that the cost of doing nothing would be much higher in the long run because of resource scarcity and environmental damage. Its hard to put a monetary value on that. Either way, paying the “true cost” of energy use is fair and would create incentives for renewable energy and energy efficiency.

Claims that cap-and-trade will not work are also in doubt as it 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. Also, after much criticism and a slow start, the European Union may meet or even exceed its Kyoto emission goals by 2012.1 In Oklahoma, Western Farmer’s Electric Co-op has voluntarily used cap-and-trade to offset its carbon emissions by encouraging farming practices that reduced emission. Under cap-and-trade, those practices would not only save money on energy usage but would earn credits that would add to farm profits.

(1)  http://www.tnr.com/blog/the-vine/europe-really-track-meet-its-kyoto-goals