Sound The Trumpet : Treasury Memo: Cap and Trade Would Devastate U.S. Industrial Base, Trigger Energy Rationing

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“Treasury Memo: Cap and Trade Would Devastate U.S. Industrial Base, Trigger Energy Rationing”
by Newsmax.com - John Rossomando
September 24th, 2009

President Obama's cap-and-trade plan could deliver several blows to the U.S. economy, according to a Treasury Department memo that one observer described as "damning."

The country could lose 1 percent of its gross domestic product, face accelerated outsourcing of manufacturing jobs, and experience energy rationing if cap and trade became law, according to the memo, which the Competitive Enterprise Institute obtained under the Freedom of Information Act.

“The memo was damning particularly . . . by pointing out what opponents of cap and trade have long said is the point of cap and trade, and has been proven by Europe’s experience,” said Christopher Horner, a senior fellow at the institute. "You will chase off energy intensive industries — meaning manufacturing jobs. The memo singles out steel, cement, chemical . . . glass, plastic, and ceramics — the same ones that have been clobbered in Europe by this.

“This is the largest outsourcing scheme in history, not just in theory, but in practice,” he said.

The memo, prepared after Obama’s Feb. 24 speech to a joint session of Congress, details Treasury's analysis of the economic impact of cap and trade, which ties climate change to business practices.

The United States gained steel jobs from Spain because the manufacturer's costs under the European Union’s cap-and-trade program chased the jobs to Kentucky, Horner said. However, that foreshadows how cap and trade could cost the United States jobs that move abroad, he said.

The report concludes that cap and trade could result in the loss of the U.S. market share in the global economy.

The administration expects cap and trade to double the economic costs of all environmental regulations to the economy, and Horner said the 1 percent reduction in GDP would “institutionalize recession.”

Cap and trade could generate between $100 billion and $200 billion in federal revenue each year and would increase the cost of existing energy tax provisions, according to the memo.

The Treasury official who wrote the memo suggests using either a carbon tax or a cap-and-trade system that would price carbon at either a fixed tax rate or at a variable market price of emission allowances. The price would be set at a level where firms and consumers would experience enough financial pain to compel them to reduce their emissions.

“Cap and trade has one purpose, and that’s axiomatic, and that is to increase the cost of energy,” Horner said. “The president’s proposal — and that’s what the Treasury is talking about — would cause electricity prices to skyrocket [because] the cost of energy is embedded in everything, so you are talking about a very economically damaging proposal.

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