Green Ideas From Our Benevolent, Creative, and Infallible Government

We have all felt the media heat from global warming over the last few years. This controversial issue gas spurred a lot of research, with evidence both supporting and and opposing the assertion that this phenomenon was caused by the human race. To help cool us off, President Obama has allocated about 61 billion dollars in stimulus money to "greening" our energy. My question is - what exactly are we stimulating here?

Cap-and-trade, theoretically, is supposed to work as such: The government chooses how much carbon dioxide they want to emit. They then auction off "energy credits" to companies willing to pay the most. These credits grant purchasing firms the rights to emit (x) tons of CO2. The credits can also be traded between firms in a secondary market. These credits punish the evil polluters and stimulate investment in clean energy. Doesn't this sound great!?

Those who support this bill claim that making our environment green will create new jobs. We will need construction workers to build the factory, computer programmers to create the software needed to run the new power plants, and of course a staff to run the plant itself. However, as any economist will tell you, there is no free lunch. Although this bill will create quite a few jobs in the "green energy" sector, it will destroy jobs elsewhere. The mining, oiling, and manufacturing industries (a large sector of employment) will suffer a huge decline - resulting in the net effect of this bill being a decline, not an increase, in employment.

Proponents of this bill believe that it will tax greedy polluters and encourage them to invest in alternative energy sources. However, the legislation currently circulation provides 85 percent or more of these energy credits to polluters for free.

The supply shock that will come from this program will cause the price of fuel to rise. This higher price that firms have to pay will inevitably be passed down the supply chain, ending with none other than (you guessed it) the consumer - you and me. According to the Congressional Budget Office:

"Under a cap-and-trade program, consumers would ultimately bear most of the

costs of emission reductions. Firms that used emission allowances for CO2 would

generally pass along to consumers the cost of using those allowances in the form of

higher prices for their products—regardless of whether the government sold emission

allowances or gave them away."

So who is suffering now? Who is winning?

• Losers: Well, since energy companies have started charging higher rates for their product, innocent consumers are paying the full price of the cap-and-trade program. Since the polluting firms themselves aren't suffering losses, they have no incentive to invest in alternative forms of energy. Consumers still need electricity, so they will be forced to pay exorbitant energy prices with no alternatives, since everyone needs electricity in their home (could you live without internet, phone, or light?).

• Winners: Could this be another sub-prime scheme fiasco? This may sound like a conspiracy theory, but it is Wall Street that stands to benefit the most from this deal. There is good money to be made in trading these credits on a secondary market - which means traders only stand to gain from the institution of this bill.

There are two good reasons why we should not impulsively obliterate our economy.

1. There is still a lot of uncertainty about the Global Warming issue all together. A lot of evidence supports that global warming is a phenomenon caused mostly by human activity, however, there is just as much evidence supporting the claim that humans play a minor role in warming our planet. It would be very unfortunate to postpone passing some kind of legislation to find out that we will pay more fixing our environment than we would have taking preventative action. However, it would also be unfortunate to pass this bill only to find out that we destroyed jobs and GDP growth for nothing.
   
2. Given that polluters aren't really paying more, it is still undetermined whether or not this bill will actually lower emissions, as our European friends can tell us with their experience with the Kyoto Protocol (the EU's cap-n-trade bill). Instead of acting in panic, we need to compile a more educated, thought-out bill. If we don't do at least this, we will suffer in vein as we watch our economy and environment continue to deteriorate.