Cap and Trade

My latest in the American News:

One key aspect to Barack Obama's inaugural budget proposal is a system meant to reduce America's dependency on carbon-based energy.

According to Scientific American, by 2020 Obama wants to cut the nation's greenhouse emissions to 14 percent below 2005 levels. By mid-century he aims to have greenhouse emissions at 83 percent of 2005 levels. The Obama administration aims to achieve these goals partly through a "cap and trade" scheme. Under this plan the government "caps" the amount of carbon emissions that may be produced while creating a market to "trade" carbon credits. If I make my business more energy efficient, I can sell my carbon credits to you if you want to increase your carbon emissions. Cap and trade works by making carbon a scarce resource and then making people pay for the right to pollute.

There are hidden costs to such proposals. The Obama team has set a goal of making renewable energy more affordable, which it will do not through reducing the price of renewable energy but by increasing the price of carbon-based energy. The administration plans to raise $646 billion through cap and trade, which it admits will be paid by all Americans in the form of higher electricity bills.

Anyone who uses carbon-based fuel to run an automobile or to provide heat or electricity to a home, in other words everyone, will face far higher energy prices. This is why the American Farm Bureau, for instance, came out against a cap on greenhouse gases, as it would raise the cost of fuel and fertilizer used in food production.

Further, the trade of carbon credits is liable to manipulation and insider dealing. Stanford economist Michael Boskin argues cap and trade "would ensnare a vast network of covered sources, opening up countless opportunities for political manipulation, bureaucracy or worse."

The Obama administration is almost wholly depending on wind and solar power to make up for lost energy from carbon sources. Science journalist William Tucker notes, though, that the intermittent production of wind and solar power makes them highly inefficient. Sometimes the wind does not blow and the sun does not shine. Our ability to store electricity is severely limited, so electricity must be used as it is produced. Dependence on wind and solar power likely means rolling brownouts or blackouts.

Because of the enormous land requirements for wind and solar power generation, they must be located in remote places (like South Dakota) and then transmitted long distances to get to where people actually live. This is highly inefficient. Transmitting over long distances loses power to heat and friction. One solution would be to upgrade all of our transmission lines. But, Tucker says, the cost would easily surpass $1 trillion in addition to the political problem of deciding where new transmission lines will run.

The Electric Power Research Institute calculates that even under the best scenario, including energy infrastructure upgrades costing trillions of dollars, electricity savings from "going green" would amount to only 7 to 11 percent.

Tucker suggests that the best way to lower carbon emissions is by greatly expanding our use of nuclear power for electricity and using wind and solar as supplements. But the Obama administration has neglected nuclear power.

Becoming more energy efficient is a good idea for a host of reasons. Perhaps the Obama administration, with its vaunted respect for science, will promote the cost-effective alternative of nuclear power and rethink proposals that will bust the budgets of average Americans.