Think your budget is tight now.
Prices for gas, natural gas, electricity and food will likely skyrocket if the Senate passes a bill later this month to reduce greenhouse gas emissions.
Generically known as cap-and-trade legislation, the bill proposes a 17-percent reduction in carbon emissions by 2020, and an 83-percent cut by 2050.
The Senate is expected to consider the bill later this month. Similar legislation already passed in the House. If the bill is vastly different from the House version, it will go to a compromise committee. Obama is expected to make the bill law.
The legislation essential makes greenhouse gases a traded commodity. It limits emissions and allows businesses and agriculture to buy and sell emission credits. The Commodity Futures Trading Commission would create emission-trade markets. Emission credits would be traded much like wheat, soybean or corn futures.
A Congressional Budget Office analysis suggests cap-and-trade legislation would increase federal revenue by $846 billion between now and 2020, prompting Oklahoma Republican Rep. Frank Lucas to dub the legislation “cap and tax.”
Call it cap and trade or cap and tax, it would cause energy prices to skyrocket as companies buy emission credits and update pollution controls to meet the tougher standards.
President Barack Obama has said coal- and natural-gas fire electricity-generating plants would pass those costs on to consumers. He said consumers would be able to recoup those costs by using more efficient appliances, and utility costs would fall as the country moves toward greener, more efficient energy production.
Oklahoma agriculture and utility representatives said greenhouse gases legislation will pass Congress and become law this year, and it will hurt the state because its major industries are farming, ranching, oil and natural gas.
“It’s going to hurt Oklahoma big time,” Payne County farmer James Williams said.
THE BIG HIT
Farming and ranching takes a lot of energy, and gas, natural gas, diesel fuel and electricity prices will go up, Oklahoma State University agriculture economics professor Mike Dicks said. Dicks’ specialty is agriculture policy.
Those costs will go up, but farm product prices will continue to fall, he said. It’s all supply and demand. As the American farmer improved production and efficiency over the last 70 or 80 years, supply has increased faster than demand and prices have tumbled, Dicks said.
Cap-and-trade won’t change supply and demand. It will increase farming and ranching costs, and accelerate the decline of the American farmer and rancher, he said.
“We’ve been kind of killing ourselves off,” Dicks said.
Cap-and-trade’s big problem is no one has analyzed its affect on the economy, especially the farm and ranch economy.
“Analysis is only as good as the time it takes to do it,” he said.
The agricultural community hasn’t had time to analyze cap-and-trade legislation. It’s still trying to analyze the 2008 farm bill. The Obama administration is pushing massive legislation through Congress – health-care reform, cap-and-trade, economic bailout. The analysis of those bills hasn’t been completed.
“American policy is to get big bills out there and micromanage as you go,” Dicks said. Holes and inequalities in the legislation are fixed on the fly. Small holes are ignored. Big holes get patched,
If the George W. Bush administration had decided to look at global warming five years ago, a bill with the proper analysis would be available now, he said. “Now, we are in crisis management mode, and that makes it tough.”
IN THE COUNTRY
The cap-and-trad mantra at the Central Rural Electric Cooperative in Stillwater is fair, affordable and achievable.
CREC Chief Executive Officer David Swank said he expects some kind of greenhouse gas emission legislation will become law this year. The immediate result will be a $20 to $80 per month electric-rate increase.
The cooperative doesn’t generate electricity. It buys electricity and distributes it to more than 18,000 residential and commercial accounts in Payne and six other counties in central Oklahoma.
Member-owned, investor-owned or municipal-owned utilities will feel cap-and-trade’s pinch, Swank said.
That’s where the mantra falls into place.
Climate change legislation must be fair to all utilities and rural and urban consumers, Swank said. It shouldn’t have a greater impact on rural residents and businesses, and must recognize regional differences in how electricity is produced.
Affordable should be an easy concept.
The legislation shouldn’t make electricity too expensive for any American to afford, Swank said.
Achievable may be harder to grasp because it works hand-in-hand with affordable. The basic question is: Does the technology exist to meet the carbon dioxide reduction goals? The next question is: Is it affordable?
CREC buys electricity. Its supplier embraces alternative and renewable energy production, Swank said.
“I think CREC, and all coops in general, are good stewards of the environment,” he said.
CREC helps residential and businesses utilities use energy more efficiently, he said.
The cooperative will play host to an energy forum Oct. 27-28 that will examine alternative and renewable energy options and how they can be used in homes and businesses.
It also promotes Web sites to its customers that help them use electricity more efficiently.
Although Swank feels climate-change legislation is inevitable, he said a collective effort between utilities and customers could achieve the same goals without government intervention.
He also urged people to have a voice in this bill by contacting their senators and representatives.
ON CAPITOL HILL
Lucas voted against cap-and-trade legislation in the House, saying the bill was rushed to passage and ill conceived.
“It’s a price-taker not a price-maker, Lucas said.
If cap-and-trade becomes law, the prices of gas, diesel fuel, natural gas and electricity will go up and Americans will use less, he said.
The legislation’s goal is to raise revenue for the federal government and reduce consumption, he said.
How cap-and-trade will work
• If a company produces 100 units of carbon dioxide, the government would allow it to produce 50 units.
• The company can purchase 30 units in the government’s trade program from companies that have reduced their emissions or receive emission credits because they are oxygen producers. The trading program would increase federal revenues by approximately $846 billion between 2010 and 2019, according to a Congressional Budget Office analysis.
• The company must reduce emissions by 20 percent by adopting new technology and installing it in its plant.
• The company’s costs of purchasing emission credits and upgrading facilities will be passed on to consumers. It will make fuel and electricity more expensive, causing consumers to use less.