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Wednesday, February 03, 2010

CAP AND TRADE IN IOWA 

CAP AND TRADE IN IOWA

With winter maintaining an icy grip here in Iowa, we are all faced with the prospect of the cost of heating our homes. At least for this year, our utility bills may be a bit lower, as the cost of natural gas is comparable to last year, and coal (the main source of our electricity) is stable. However, the Waxman-Markey energy bill commonly referred to as Cap and Trade, will have some significant effect on future bills.

In theory, this bill is supposed to reduce carbon emissions. In fact, it is a massive tax on many industries, with particular emphasis on energy producers. The bill establishes a limit to the tons of carbon emissions each state may emit. If your state exceeds this limit, it can either pay a penalty (an excise tax), or purchase carbon credits from other states that do not exceed the limits. So, how will this impact Iowa, and the entire Midwest?

Not surprisingly, the bill favors the states of the sponsors, and penalizes other states. Specifically, coastal states will potentially reap large credit payments from mostly Midwest and Southern states. In other words, we will subsidize some states, through higher utility rates, with the increases used to buy credits from the states which will benefit from the skewed limits placed by the government. Let me illustrate, using the EPA figures included in Waxman-Markey. The following illustrates the initial tonnage allowed for specific states, and the allowances for ongoing years.

California - 87 now, between 99-127 in 2012
New York - 57 now, between 58-69 in 2012
Massachusetts - 24 now, between 23-27 in 2012
Oregon - 20 now, between 20-23 in 2012

Notice how these four states, all Obama supporters with influential members of a Democratic Congress, all receive large increases in the allowed carbon tonnage. So, how does this compare to our neck of the woods?

Iowa - 36 now, 21-29 in 2012
Wisconsin - 55 now, 34-44 in 2012
Minnesota - 56 now, 33-45 in 2012
Indiana - 75 now, 52-61 in 2012

Gee, all four of these states are reduced in allowable emissions from present usage. In fact, the reductions are substantial. What this means is that utilities in these four states will be required to buy credits from the other four states, which receive an increase each year. I sure am thrilled at the prospect of my utility rates “skyrocketing”, (Obama’s word), so that we can subsidize the rates in California, New York, Massachusetts and Oregon. I am sure our neighbors are also excited by this prospect. Keep in mind that all of these costs will ultimately be paid by us.

The bottom line is that beginning next year, we can either be cold, or pay a lot more to stay warm. Frankly, I have problem with that. This bill has passed the House of Representatives (I guess Mr. Boswell is actually a Congressman from California), but has not yet cleared the Senate. I will be watching to see if our Senators care about us at all, or if their constituency is actually on the East or West Coast. To be honest, though, it may not matter. The Environmental Protection Agency already has the regulatory power to enact these provisions, without Congressional approval. Lisa Jackson, the EPA Administrator, has announced her intention to institute the Cap and Trade regulations without Congressional action, under her regulatory authority. Right now, it looks like it sucks to live in the Midwest. Stay warm all.

If you would like to fact check my comments, feel free to do so. A good link is:
http://www.eenews.net/public/25/12747/features/documents/2009/10/13/document_cw_01.pdf

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