Location: Pantego, Texas, United States

Thursday, September 17, 2009

The carbon cap and trade bill passed by the House earlier this year will increase energy costs for people in the form of increased revenue to the government. The bill is essentially a tax increase, but is designed to help the rent seekers who supported Obama and punish those who didn't. While everyone agrees that energy costs will be increased, there is disagreement as to the amount. All estimates are purely speculation at this time, since the law of unintended consequences will be a factor if the plan is implemented. For example, I think that the cost of "green" energy will be significantly higher than expected. Then, the bill has a requirement that all houses sold must be in compliance with new energy efficiency standards. Existing homes do not meet those standards, and estimates are that it will cost many thousands of dollars to put houses into compliance. This requirement could make it virtually impossible to sell an existing home. It is hard to estimate what the impact of this would be on society, but is would surely slow home sales, and would create some of what Obama calls "green" jobs for people who install new household appliances, insulate homes, etc. It is generally agreed that the House bill would reduce GDP by about 1% per year. If GDP growth is reduced from 3% to 2%, after 50 years the economy will only be 61% of what it would have otherwise been. That is a significant change. The cost to individuals each year is more contentious. I think that it will be about $1000 per year per person initially. (Advocates of the bill say that poor people would be subsidized by the government, but that just means the cost will be higher for other people.) Here is what the Treasury Department estimates carbon cap and trade will cost.


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