McCain's Cap-and-Trade Plan
Club for Growth Disappointed with McCain’s Cap-and-Trade Plan
Washington – McCain’s cap-and-trade bill to limit CO2 emissions is badly flawed and would do great damage to the economy. Although McCain promotes the cap-and-trade plan as a market-based solution, it is just another heavy government regulation with tremendous costs to American businesses and economic growth.
The cap-and-trade system has a number of flaws. For starters, the proposal is no different than a tax on carbon emissions; it merely hides the cost increase through a trading mechanism in order to make the bill more politically palatable. Companies who can’t afford to lower their CO2 emissions will be forced to buy emission credits from other companies or the government, raising production costs. According to the Congressional Budget Office’s analysis, the legislation would amount to a $1.21 trillion tax over ten years. These costs will then be passed on to consumers in the form of higher prices. According to a paper by the Heritage Foundation, energy prices could jump by 36 to 65 percent by 2015.
The proposal is also fraught with uncertainty since businesses won’t be able to predict the price of a credit. Uncertainty is itself a cost since it is difficult for companies to plan and make vital business decisions. The specific proposal introduced by John McCain (now called the Lieberman-Warner bill) is especially costly since it gives companies little time to adjust to the new rules. His plan would mandate emissions to decline to 1990 levels by 2020—a difficult task at a time of population growth and increasing energy demand.
Finally, the system is ripe for fraud. In Europe, where the system has been in existence for some time, a number of scams have recently come to light.
“When it comes to other issues, like the Farm Bill and free trade, Senator McCain has demonstrated a critical understanding of the harm government can do when it interferes in private enterprise and imposes cumbersome regulations on businesses,” said Club for Growth President Pat Toomey. “But today, Senator McCain has done a one-eighty, promoting a bill heavy on government regulation and mandates. The cap-and-trade bill contains all the problems Senator McCain accuses the Democrats of supporting on other policy issues. We encourage John McCain to apply the same free-market principles he so often supports to the debate over environmental policy.”
