Cap and trade may not be dead. President Obama plans to be hiding an energy price hike in the tax code.
After the 2010 midterm elections, President Obama said in a press conference that the liberal shellacking wasn’t about his policies, but was simply the failure of communication about his policies that caused massive Congressional turn over.
Now, President Obama is prepared to bring his cap and trade scheme back from the dead. Same agenda, different hidden message.
Senator-elect Joe Manchin of West Virginia shot the current Cap and Trade bill with a rifle in a campaign ad, assuring constituents he would not be voting for the legislation in the next Congress and came out this week with a statement saying Senate Majority Leader Harry Reid would not be pushing it through during the lame duck session or in the next Congress.
"I got his commitment that cap and trade will definitely not be on the agenda and won’t be on the agenda during the next Congress,” Manchin told reporters following his swearing-in. “I have a deep commitment and a personal commitment from him that cap and trade is dead.”
Although companies and individuals may not necessarily be trading carbon credits in the future, they will be paying more for energy.
“There is a renewed commitment to phasing out what are called fossil fuel subsidies in hopes that there will be a reduction in green house gases as a result… there would be less use of carbon based energy absent the subsidies,” Pete Sepp, Executive Vice President of the National Tax Payers Union says.
The Obama Administration is planning to increase prices on fossil fuels through the reduction of subsidies while at the same time raising taxes on fossil fuel companies. The subsidies once used for fossil fuels will then be allocated to "renewable energy projects."
The Joint Committee on Taxation data already shows a definite bias in the tax code in favor of renewable energy. Renewable energy projects such as wind, solar and ethanol receive on average nearly $12.5 billion a year in tax provisions while oil and gas only receive under $1 billion.
Usually, fewer government subsidies are a good thing, but in this case, by favoring and supporting renewable energy over fossil fuels, the government is manipulating the market through the tax code. In the free market, the most cost-efficient energy would win, but the government is planning to re-allocate money taken from the reduction of fossil fuel subsidies and placing it into subsidies and tax breaks for renewable energy; forcing fossil fuel companies to compete with government-picked winners.
Sepp believes aiming for a neutral unsubsidized market for all energy should be a set goal, having a conversation about how to lower the overall corporate tax rate in exchange for lowering subsidies is a valid solution, however, the government is more interested in favoring renewable energy and phasing out fossil fuels by punishing companies and consumers for using them.
And while renewable energy is marketed as affordable and sustainable, renewable energy resources are incredibly more expensive and actually require more government subsidies to survive in addition to the increased demand on the environment.
Renewable energy such as ethanol is hardly sustainable for the environment. To grow crops used to make ethanol farmers must use a large amount of pesticides, water and heavy machinery requiring oil and gas to operate. The government then subsidizes waterways, gas station owners who need to install special ethanol pumps, special trucks to carry ethanol and more.
On top of renewable energy being inefficient, it is not yet sustainable.
In the past, despite calls from the International Energy Agency, Russia, India and China have made clear they are not interested in limiting the use of fossil fuels in exchange for limited economic growth. Although these countries made some commitments to move away from price controls of oil and gas during the recent G20 Summit, the United States has shown that we are not ready to rely on them to follow through on those commitments.
The U.S. government punishing the fossil fuel industry creates a hostile operational and working environment full of red tape, creating a perfect opportunity for companies to send jobs overseas to countries with less climate change based regulation, something President Obama claims to disapprove of.
The IEA recently put out analysis suggesting that the “price signal from subsidy phase-out would provide an incentive to use energy more efficiently and trigger switching from fossil fuels to other fuels that emit less green house gases.”
In other words, the IEA is suggesting fossil fuel energy rationing in order to force consumers to use renewables, paying more for energy.
“This idea suggests not trying to remove subsidies so much as to punish companies for what they produce,” Sepp says. “It represents a re-packaging of the whole philosophy behind Cap and Trade which is to ration and punish carbon based energy and reward and promote renewables.”