Does 'Cap & Trade' Really Mean 'Cap & Tax'?

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Health care reform is not the only controversial legislation before Congress these days. A climate change bill to fight global warming has many Americans concerned about their jobs and energy prices.

Country music recording artist Trace Adkins motivated the audience in a video shown at an "Energy Citizens Rally" in Virginia.

"There's a lot of talk in Washington about climate change legislation, but whatever they do in Congress, they shouldn't ship American jobs overseas and cause gas prices to rise," Adkins said in the video.

Rallies have been held around the country, where thousands of Americans have taken a stand for American jobs and affordable energy, and that's not all. Through speeches, photos and petitions, these energy citizens protest climate change legislation already passed in the U.S. House and destined for the Senate.

Cap and Trade = Higher Energy Prices

At the crux of the bill? Cap and trade. It's a system where the government caps or limits carbon emissions by companies, and then creates a market for those companies to trade pollution allowances. Cap and trade is the heart of President Barack Obama's proposal to fight global warming.

"Don't believe the misinformation out there that suggests there is somehow a contradiction between investing in clean energy and economic growth," Obama said. "It's just not true."

When it comes to cap and trade, however, many Americans believe just the opposite.

Phil Kerpen is the director of policy for Americans for Prosperity. He says consumers will be hurt the most by cap and trade, with its bottom-line goal of making fossil fuel energy more expensive -- so it's used less by people, resulting in fewer emissions.

"The way cap and trade works is any company that uses fossil fuels -- if they want to stay in business, they'll have to go to a government auction, and they'll bid against each other for permits, for permission from the government to continue to use fossil fuels," Kerpen said.

"And the price of those could be quite considerable, and it will largely be passed on to consumers. That's how it has the impact of being like a tax on energy," he added.

How big of an impact on American households could cap and trade cause with its higher energy prices?

Estimates range from as high as more than $3,000 a year to around $175 on the low end. Kerpen believes the most credible study estimated the impact per family at around $1,200 to $1,300 annually.

"For regular folks, who aren't an Al Gore, who spends $30,000 on his home energy prices, they've got to spend an extra thousand dollars or more per year on energy. That means there's something you have to give up, something that matters to your family," Kerpen said.

The Effect on Small Businesses

Karen Kerrigan leads the Virginia Small Business and Entrepreneurship Council. She believes the higher cost of energy will also cripple small businesses.

"The cost of gasoline, the cost of electricity and other fuel costs for small business owners, and right now, when our economy is suffering and small businesses are struggling, the last thing that they need right now is additional costs imposed on their firms," Kerrigan said.

She believes the additional costs could lead to lost jobs.

"Unfortunately, what they'll look at is firing employees, in terms of laying off employees," Kerrigan added. "And again right now, given our current economy, we don't need more job destruction. We need job creation."

Kerpen said, "To use President Obama's own words, he said for this to work, electricity prices would 'necessarily skyrocket.' He said that to the San Francisco Chronicle."

Critics like Americans for Prosperity say cap and trade is really "cap and tax," and they're encouraging Americans to protest any climate change legislation they say is really about growing government.

"Don't say this is just about environmental regulation, environmental protection, and then hide in there an $800-plus billion increase in federal revenue," Kerpen said.

"We're all going to be poorer, less free. Our lives (will be) less comfortable, less convenient, less dignified," said Steve Milloy, the founder and publisher of Junkscience.com. Milloy believes we'll be living in a "green hell" of government control if legislation like cap and trade becomes law, and he's written a book about it.

"It's really, it's sort of a power grab," Milloy said. "They'll be able to control the coal industry, the natural gas industry, the oil industry; make these industries beholden to them, kind of like what they've done with General Motors. It's a slow takeover of private industry, using the environment as a shield."

Cap and Trade Origins

Where did the idea for cap and trade come from in the first place? CBN News traveled to the state of Maine to learn more about its origin.

It may seem like a far cry from the debate in Washington, D.C., but the man who is credited with designing cap and trade back in the 60s lives there, and he's now speaking out about what's happening on Capitol Hill.

Greenhouse gas emissions are tough to see in the tranquil environment in central Maine that economist, Dr. Thomas Crocker, calls home. It's also tough for him to see how cap and trade, a concept he developed as a graduate student decades ago to fight pollution on a local scale, can truly help the environment around the globe if other countries don't put on their own emissions caps.

"I'm skeptical, and the reason I'm skeptical is that countries differ in their ability to fulfill their promises," Crocker said.

Crocker also doesn't like the idea of permits being given away to corporate America, instead of auctioned off, like he originally intended with cap and trade.

"You're giving away a great deal of wealth," Crocker explained. "That's politically a great thing. I've got something here that's valuable, and I'm interested in giving it to certain favored groups."

In fact, Kerpen says the House-passed legislation actually gives away 85 percent of the permits in the first year to certain companies, creating in his mind, an unfair mix of winners and losers. The winners reap billions of dollars worth of permits for free -- permits that they can still sell.

"I worry that when government steps in and picks winners and losers, they tend to do more harm than good," Kerpen said.

It's enough to cause him and other skeptical Americans to say scrap cap and trade altogether.

*Originally aired Sept. 30, 2009 

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Mark Martin

Mark Martin

CBN News Reporter

Mark Martin is a reporter and anchor at CBN News, covering various issues from military matters to alternative fuels. Mark has reported internationally in the Middle East and traveled to Bahrain to cover stories on the U.S.S. Dwight D. Eisenhower. Follow Mark on Twitter @MarkMartinCBN and "like" him at Facebook.com/MarkMartinCBN.