Although the national “Cap-and-Trade” climate bill to limit national carbon dioxide emissions failed in Congress earlier this past June, a group of six Northeastern states have made it clear that they don’t need the rest of the nation on board to pursue their so-called environmental, actually anti-business, agenda.
As the Washington Post reported yesterday, Maine, Vermont, Connecticut, Massachusetts, Rhode Island and Maryland all participated in the nation’s first cap-and-trade auction in which carbon allowances were sold at a rate of $3.07 per ton of “excess emissions”. Energy, financial and environmental organizations participated in the auction, raising a total of $40 million for the six states involved. Four more states—New York, New Jersey, Delaware, and New Hampshire—plan to participate in future auctions.
Environmental groups and Democrat leaders, of course, are heralding this as a great step forward for the nation and a model for other states to follow. But, the truth is, this cap-and-trade auction—much like its broader authoritarian predecessor, the Lieberman-Warner Climate Security Act—is devoid substance and rife with Big Government measures to stifle business incentives and stunt economic growth.
First and foremost, these efforts on behalf of the six states accomplish next to nothing—especially in the short term. Critics have pointed out that the emissions cap is higher than the current annual usage and the carbon allowance prices are negligibly low. Moreover, the cap will only drop by 2.5 percent starting several years down the road in 2015.
So the short-term effect, whether environmental or otherwise, is entirely nonexistent.
What isn’t nonexistent, however, is the short-term political effect. The reality is that this self-imposed cap-and-trade auction is a political stunt engineered by the states involved to give themselves an eco-friendly pat on the back while simultaneously lining their pocketbooks. It is a political fundraiser and nothing more.
Conveniently enough, there’s no real political risk for those supporting the state-by-state cap-and-trade system because the real financial impact is seven years down the road. Even the commissioner of the New York Department of Environmental Conservation admitted a stricter cap would have had a difficult time being agreed upon by the states. He says:
“We were concerned about the impact on the utility rates.”
So, it’s nothing more than a deceptive win-win situation for these politicians in the short-term.
The troubling long-term reality, however, is that this bodes poorly for the future economic and financial livelihood of these states when the caps begin to carry legitimate weight. As the carbon emissions limits grow stricter and stricter, energy organizations and other businesses will have serious financial incentives to evacuate the region.
What energy company would ever seek to build a power plant or invest in a state in which their own economic capability has clearly defined, governmentally imposed limits? The invisible hand of the free market will direct these businesses to friendlier, more compatible economic environments where they can reach their full potential.
When this cap-and-trade system takes on its full effect, it will prove nothing more than a blatant and obvious business disincentive to any energy company exploring potential investment areas.
They will simply go elsewhere.
This is especially disconcerting considering the fact that as populations in these states rise, demand for energy will rise in unison. As populations suffer as a result, more Big-Government solutions will be concocted to deal with any ensuing crises.
This situation in most Northeast cities should serve as a microcosm for what cap-and-trade might look like on a national level. As higher taxes and more stringent regulations have driven off the business base, the cities here systematically have been reduced from bread baskets to basket cases. The leaders and elected officials, both locally and nationally, ought to accept that cap-and-trade systems which help neither the environment nor the American people will have the same deleterious effect.
The only real beneficiaries of these types of policies are the politicians myopically intent upon capping opportunity and trading a productive economy for the welfare state.
