Cap and Trade
How does a cap and trade system work?
Cap and trade is a government-created market for greenhouse gas emissions credits. In some cases, there is a cost associated with each credit. First, the federal government sets a total limit on the amount of GHGs that entities are allowed to emit (the ‘cap’). The cap on emissions falls over time, meaning fewer and fewer emissions are permitted in the following years
Eventually, some entities will reduce their emissions and will be left with extra credits. At the same time, there will be entities that will continue to emit the same amount and others may even increase emissions. These entities will eventually have to buy credits, either from those who have reduced their emissions and have left over credits or from the government through an auction (the ‘trade’).
How would cap and trade affect small business?
The projected costs of the government’s cap and trade program are overwhelming. According to the non-partisan Congressional Budget Office (CBO) and the Joint Committee on Taxation, the proposal costs about $821 billion, while imposing $846 billion in new energy taxes over the next 10 years.
Independent analysis conducted by the nonpartisan Tax Foundation estimates that job loss could be close to 1 million jobs per year. The average family is expected to see an increase of about $1,100 in their energy-related bills (gas for the car, electricity for the house, etc.), meaning the average cost increase for a small business will be even greater.
EPA Moves Forward with Job-Killing Ozone Standards
Since Congress appears unlikely to finalize cap and trade legislation anytime soon, the Obama administration is working through the Environmental Protection Agency (EPA) to push job-killing environmental regulations. Earlier this year, the EPA proposed tightening national air quality standards. As many as 675 counties across the U.S. would violate the proposed standard, triggering job-killing mandates, costly compliance fees and financial penalties for businesses in those areas.
The economic impact of this rule would be far-reaching and essentially create a national energy tax. According to a Manfufacturers Alliance study, done in collaboration with the National Association of Manufacturers, the proposed ozone standard would lead to a total of $1 trillion in annual compliance costs and 7.3 million jobs lost. The study indicates the job losses and reduction in gross production each state would suffer if EPA’s job-killing regulations are implemented.
National Small Business Surveys Indicate Opposition to Cap and Trade
NFIB released two national surveys indicating that the views of small businesses and the general public are aligned in their opposition to a cap and trade system. The surveys were conducted in the past month, and asked respondents about their views on the issues surrounding the cap and trade debate.
"Small business owners and the public both agree that a cap and trade system would have a negative impact on jobs, energy costs and economic growth," said Dan Danner, president and CEO of NFIB.
Respondents overwhelmingly listed the economy and jobs as the most important issues, with 71% of business owners and 57% of the public thinking that a cap and trade policy will increase the cost of energy.