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Wednesday, March 18, 2009

Something Not Adding Up In Obama Cap & Trade Plan

President Obama's cap & trade plan will take money away via higher utility bills to give it back via tax credits. Why not NOT take it in the first place and then it does not need to be given back? That is our question about the 'auction' portion of the administration's cap & trade program. AAEA supports President Obama's cap & trade program, but we oppose auctioning the allowances. The allowances should be allocated free to utilities as they were in the successful Acid Rain Program. This will prevent the rise in utility bills, which are already burdening many ratepayers. In fact, the regulators in Maryland have put a moratorium on utility cut offs in response to already high utility bills.

The White House National Economic Council testified before the Senate Finance Committee that President Obama's proposed cap and trade system could raise "two-to-three times" the administration's existing $646 billion revenue estimate. This could mean the cap and trade system could actually generate between roughly $1.3 trillion and $1.9 trillion between fiscal years 2012 and 2019. The administration's plan is for excess revenues from any cap and trade bill that passes Congress will be used to compensate vulnerable families, communities and businesses. The administration's proposed 'Making Work Pay' tax credit will compensate most working Americans for the likely rise in utility costs they could expect to face after a cap and trade system goes into place. That tax credit is worth $800 per year to a household of two earners with combined annual income below $250,000.

The cap and trade proposal is aimed at lowering carbon emissions into the atmosphere by companies by requiring them to purchase credits for the level of pollution they contribute. The public forecast was based on the carbon-dioxide credits that would be issued through the new system being priced at $20 each. Each credit allows for one ton of carbon dioxide to be emitted.
According to the budget, the administration would use $120 billion of the scheme's revenues to fund clean energy technology. The balance of $525.7 billion would pay for a tax cut targeted to middle class Americans, a centerpiece of the Obama budget. (WJS, 3/18/09)

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