The Ridiculousness of Cap-and-Trade as a “Carbon Tax” May 6, 2009

 

I’m hearing a lot of talk from Republicans critical of the Waxman-Markey global warming legislation who are claiming that the cap-and-trade scheme contained in the bill is a “tax” on energy.  The whole idea of cap-and-trade arises from the notion that a free market is the best way to determine the prices for things of value. 

 

Yet, what this issue comes down to is that those who oppose a cap-and-trade system view carbon emissions (and the energy making process in general) as free.  So, when they see that the government is going to put a price on what was otherwise (and in their minds) completely free, they shout and scream and try to commit political homicide by calling it a tax. 

 

But, the shrill “carbon tax” critics are wrong about a critical assumption in their argument.  Carbon emissions are not free.  They are like commodities in the sense that they have value, and their value derives directly from the fact that their production has costs.  Those emissions are contributing to our increasingly warming planet, which affects health, coastlines, fisheries, wildlife habitat, and communities devastated by fierce weather. 

 

The traditional process of electricity generation emits a great deal of carbon.  The energy companies cannot expect to use a valuable commodity for free.  They don’t expect that they won’t have to pay for the coal they use to produce the electricity.  Why should they expect to not have to pay for the right to emit the carbon that is essential to the traditional production of electricity? 

 

When it comes down to it cap-and-trade is not a tax.  It is merely a method of allowing the free market to put a price on something that has value to the business community.