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Wednesday, March 04, 2009

Support Cap-and-Trade, Oppose Allowance Auction

AAEA supports President Obama's Cap-and-Trade program. We oppose the auction of carbon dioxide (CO2) allowances. We also need an international treaty that includes the USA, China and India as a precursor to passage of any domestic global warming legislation. We need a cap on CO2 in order to begin reducing unnecessary CO2 emissions into the atmosphere. A private sector trading program puts the power into the hands of the people, utilities and industries to come up with techniques and technological solutions to the problem. For instance, AAEA promotes an Energy Defense Reservation (EDR) and Carbon Dioxide Reduction Program (CDR) that we believe would have a significant impact in reducing CO2.

President Obama's $3.6 trillion budget plan ($1.7 trillion budget deficit) includes the provision that is projected to raise $646 billion over ten years by auctioning pollution permits (allowances) to industries that generate greenhouse gases. Our question is: why increase utility bills via an auction instead of issuing the allowances for free and allowing companies to invest in solutions themselves? The investments in innovations will be passed on to ratepayers anyway. The Obama administration plans to fund renewables projects and help poor people pay energy bills with the proceeds from the auction. But if you do not increase bills, you do not need to help them with their bills. If the utilities and other companies directly finance renewables projects, there isn't the extra layer and extra expense of the auction.

Critics argue that the auction would increase the cost of electricity, gasoline and other forms of energy for every U.S. consumer. The funds from the auction to finance a permanent tax credit of up to $800 a year for working families would be neutralized by rising energy costs. Critics argue that the 20 cents an hour made under the credit would barely cover the added $1.60 per gallon EPA says gas could cost, let alone the potential for an 80 percent jump in electricity rates. (Wash Post 3/3/09) The EPA Acid Rain Program should be the model for the Obama administration. Allowances were allocated free and the program was a complete success.

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