At Americans for Prosperity we believe that the radical taxes and regulations that have been proposed in the name of global warming represent that single-greatest threat to freedom and prosperity that our country faces.

“Climate revenues” were the largest revenue source in the administration’s budget proposal this year. What they meant of course were the revenues from auctioning off cap-and-trade permits, a disguised excise tax that will wallop every American who fills a gas tank, pays an electric bill, or buys any product that has to be grown, shipped, or manufactured.

Cap-and-trade is a tax on coal, oil, and natural gas but instead of being set at a specific amount, the total level of use is capped and companies are forced to pay the government for emissions permits-which Wall Street wizards at companies like AIG and Goldman Sachs can in turn trade on sophisticated exchanges and derivative markets.

President Obama explained last year that the plan is designed to dramatically increase energy prices:

“Under my plan of a cap and trade system electricity rates would necessarily skyrocket. Businesses would have to retrofit their operations. That will cost money. They will pass that cost onto consumers.” Chronicle, January 17, 2008

The deputy director of the White House National Economic Council, Jason Furman, has admitted that auctioning off cap-and-trade permits could actually raise "two-to-three times" the budget's official $645 billion revenue estimate. If Furman is right that the real tax hike would be two or three times the official budget estimate—and it’s likely still a lowball—that would mean the actual tax hike would run well into the trillions, roughly between $1.3 trillion and $1.9 trillion between fiscal years 2012 and 2019 by Furman's own estimate.

This is not a side-effect of the plan--it's the intended goal, which was clear when Obama said in his address to Congress that he wants to give so-called renewable energies a market advantage, which can only be done by imposing a tax that dramatically increases the cost of natural gas, oil, and coal.

To fight this hidden tax, we launched a project, NoClimateTax.com, where we ask members of Congress to pledge in writing to oppose any global warming bill that includes a legislated increase in federal revenue. I am pleased to say that 10 of 35 members of the House Western Caucus and 3 of the 12 Senate members have already signed the pledge. I encourage the rest of you to do so, so we can make clear that those who refuse to make such a commitment are interested more in taxes and spending than in helping the environment.

Of particular concern for Western States is that cap-and-trade is designed to bankrupt the coal industry. Again in Obama’s own words:

“So, if somebody wants to build a coal plant, they can — it’s just that it will bankrupt them, because they are going to be charged a huge sum for all that greenhouse gas that’s being emitted.” San Francisco Chronicle, January 17, 2008

Unfortunately, the House actually took the bad White House idea of auctioning off cap-and-trade permits and made it even worse.

Instead of auctioning the permits, almost all of them will be given away based on political considerations—that’s how they got enough votes to squeak the bill through on a 219-212 vote.
Senator Barbara Boxer, the biggest Senate proponent of cap-and-trade and the one who will dole out the billions of dollars worth of permits on the Senate side candidly explained how this works a couple of weeks ago:

“There’s so much revenue that comes in from a cap-and-trade system that you can really go to a person in a congressional district and get enough votes there by saying, ‘What do you need? What do you want?’ You can really help them.”

All those permits—worth billions—being given away for free are good news for the corporations that will get windfall profits, but they do nothing to soften the blow of steeply higher energy prices for consumers. As pro-cap-and-trade economists Kristen Sheeran and James Barrett have explained:

“Try buying World Series tickets from a scalper. Would he charge you any less if he found the tickets on the ground? Of course he wouldn’t. Like energy, the street price of World Series tickets is based on supply and demand. The supply and demand for tickets is the same no matter how much the scalper paid for them, and so the price he charges you will also be the same no matter how he got them.

Of course, the scalper would much rather get his tickets for free - and that’s precisely the point. Polluters are financially much better off if permits are given away instead of auctioned, but the cost of cutting emissions and the resulting effect on energy prices will be the same no matter how the permits are delivered.”

That’s why some electric utilities support the bill, because they stand to make a fortune from it. For instance, Exelon CEO John Rowe estimates that for every $10 increase in the price of cap-and-trade permits, Exelon’s annual revenues will increase $750 million dollars. Those estimates can only mean that they believe, correctly, that they will be able to raise their rates considerably.

That means consumers pay more. A lot more. Not just for electricity. Same thing for gasoline, diesel, natural gas, and everything grown, shipped or manufactured in the United States, which all rely on the price of energy. The so-called consumer protections provisions that require the value of free permits to be used for consumer relief will simply not work, because the plan will raise market prices regardless of how permits are distributed, which is what happened in Europe.

Don’t take my word for it. In March, President Obama’s budget director, Peter Orszag, got right to the point:

“If you didn't auction the permits it would represent the largest corporate welfare program that has even been enacted in the history of the United States. All of the evidence suggests that what would occur is that corporate profits would increase by approximately the value of the permits.”

So the value of free permits goes to corporate shareholders, while businesses and consumers face skyrocketing prices for energy. Those higher prices will force companies to cut production or move it overseas. Millions of jobs could be lost.

We’ve all heard a lot about green jobs, and yes if you divert billions of dollars into investing in any particular sector you will create some jobs. But jobs created by government intervention in the market are not a benefit of that policy. They are a cost. The cost of supporting uneconomical jobs falls on the productive economy.

Most green jobs consist of hiring low-wage workers with caulking guns to weatherize buildings. A few are in areas like building and deploying wind and solar installations, but a lot of those are manufactured overseas and we import them.

We are trading away high-wage, high-value manufacturing jobs for these green caulking jobs. Any time you spend billions of dollars you will create some jobs, but the key question is what the cost is when you divert resources from higher value activities. On balance, green jobs programs and especially the proposed cap-and-trade bill will destroy millions of more jobs than they create, and will destroy better, higher-paying jobs.

Spain tried a green jobs program that President Obama and his allies have held up as a model for cap-and-trade. According to researchers at the Universidad Rey Juan Carlos, the results have been disastrous:

• Every “green job” created by government intervention destroys 2.2 real jobs in the private economy. Since 2000, Spain has spent $753,778 on each “green job.”

• Each “green” megawatt installed in Spain destroyed 5.39 jobs in other non-energy sectors of the economy. Spain would have to raise energy costs by 31% to repay the government’s generated debt as a result of their green initiative, now reaching $36 billion.

• Spain’s annual emissions of carbon dioxide have increased nearly 50% -- so it doesn't even work!

And what do we gain environmentally? Basically, nothing. Cap-and-trade failed to reduce emissions in Europe. And even if emissions targets were met, climate models show the reductions would have no detectable impact on global average temperatures.

In fact, it could very well increase emissions. Even the Environmental Protection Agency has warned that cap-and-trade “can cause domestic production, which embodies the greenhouse gas allowance price, to shift abroad, which would thus result in an increase in greenhouse gas emissions.”

The bottom line is that cap-and-trade means huge job losses, skyrocketing energy prices, and real suffering for American families for the sake environmental moral vanity. It does nothing to help the environment, and we can’t afford to spend trillions of dollars just to get a “warm, green feeling” during a time of economic distress.